Yahoo is laying off 2,000 employees as new chief executive Scott Thompson sweeps out jobs that do not fit into his plans for turning around the beleaguered internet company.
The cuts announced on Wednesday represent 14 per cent of the 14,100 workers employed by Yahoo, which is based in Sunnyvale, California.
The company estimated it will save about $375m annually after the layoffs are completed later this year.
"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose - putting our users and advertisers first - and we are moving aggressively to achieve that goal," Thompson said in a statement.
The company declined to comment on severance details, but the layoffs had been expected. The move marks Yahoo's sixth mass layoff in the past four years under three different chief executives.
This one will inflict the deepest cuts yet, eclipsing a cost-cutting spree that laid off 1,500 workers in late 2008 as Yahoo tried to cope with the economic crisis.
The layoffs come as Yahoo's revenue declines amid competition from Web rivals Google and Facebook, and as the company fights a proxy battle with hedge fund manager Daniel Loeb.
Loeb, who runs Third Point, is seeking to appoint four new directors to Yahoo's board. Third Point, with a 5.8 per cent stake in Yahoo, is the company's largest shareholder.
Thompson, the new CEO, is making his move three months after Yahoo lured him away from his previous job running eBay's online payment service, PayPal.
Meanwhile, Facebook is stepping up its patent dispute with Yahoo by filing its own lawsuit against the struggling Internet icon. Facebook's lawsuit Tuesday came just weeks after Yahoo Inc claimed that Facebook violated 10 patents covering advertising, privacy controls and social networking.
Facebook denied Yahoo's allegations and accused Yahoo of violating 10 of its patents covering photo tagging, advertising, online recommendations and more.
The spat is escalating as Facebook prepares for an initial public offering of stock in the coming weeks. If all goes expected, Facebook could fetch as much as $10bn in the IPO, for a total market value of $100bn.
Yahoo, which has struggled amid competition from Google and Facebook, has a market value of about $18.3bn.
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