Are Navigation links different to static links
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We are trying to reduce the number of links on our homepage. We could remove some fly out navigation links, We rank 1st on Google for some of these links. Would removing these hurt our SEO. The links are accessible 1 level down if we remove the homepage.
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Why are you trying to reduce the number of links on your homepage?
It sounds like you are doing rather well already if you are ranked #1 on Google for different keywords.
If you are referring to the site listed in your profile (re: mattresses, bed, etc.), you do have a lot of links in your top navigation; however, I think it does a great job of sorting pages from a usability standpoint.
If you have links in navigation and in the area below with the images, that is fine - as long as you feel you have designed it this way for users.
I read somewhere that Google only counts the first internal link on a page to pass link juice - so if you have 5 links to "bed frames" you aren't going to get any extra link juice... just the initial link receives it.
Long story short - if you believe that the top navigation does a good job of sorting your content to make it easy for users to find - keep it. If you think that the images and links of your top selling products make sense for your users - keep it.
If you are worried about going over 100 links per page, I think the main reason for that "rule" is 1) it can make crawling more difficult for Google and 2) so you don't create link farms. As long as your website is being indexed properly and you are ranking well... I wouldn't worry about it.
Hope this helps.
Mike