It usually doesn't work that way, especially when 500 employees constitutes only 4 percent of the workforce. That's a lot of employees to target. A layoff is the result of a company's financial situation, which can fluctuate through no fault of the affected employees; if an engineer is assigned to a faltering project and taht project gets the axe, then it is not necessarily an indictment of his job performance.

Even if those that get cut are cut because they aren't "top performers", that doesn't mean they aren't useful or good developers. You have to be good to get into Yahoo et al in the first place, and if there's a lot of competition in the job market, you may be able to get super-excellent candidates into jobs until the market looks up, at which time your employees that are merely good are not so precious.