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Yahoo has announced it will cut 2000 jobs as the struggling Sunnyvale, California company attempts to focus on what its new chief executive called a smaller number of "core priorities."
"Today's actions are an important next step toward a bold, new Yahoo - smaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require," chief executive Scott Thompson said in a statement.
The layoffs represent about 14 percent of the company's full-time workforce of 14,100, not including contract workers. The cuts will be Yahoo's biggest in recent years, surpassing a layoff of 1500 people that Yahoo made shortly after the last recession began in 2008.
When approached as they were pulling into the Yahoo headquarters in Sunnyvale, employees declined to comment about the layoffs. Security personnel could be seen patrolling the parking lots as reporters gathered outside.
Thompson has previously said he planned to make significant changes at the company, where he was named whief executive in January after previous chief executive Carol Bartz was fired for failing in her own effort to turn the business around.
Yahoo has some of the most popular websites in the world, with nearly 700 million users. But while the company is still profitable, it has seen revenue and profit decline as it has lost share of the online advertising market to newer companies like Google and Facebook.
"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 added in the statement.
The company did not indicate where the cuts will be made, but said they are part of a plan to refocus the company on "a select group of core businesses, the platforms that support those core businesses and the data that drives deep personalisation for users" as well as advertisers.
Analysts have said at least some of the cuts will likely hit Yahoo's staff in Silicon Valley. While the company does not provide information on the number of employees in specific locations, in the past nearly a third of its workforce has been based at Yahoo's Sunnyvale campus.
In the statement, Yahoo said it expects to save $US375 million a year by making the job cuts, while incurring one-time charges of $US125 million to $US145 million for severance and other costs.
Several tech industry blogs have reported in recent days that this week's layoffs may only be the first wave of broader cuts to come, but Yahoo did not confirm that Wednesday.
Yahoo said it began notifying employees if they are affected by "job elimination or phased transition."
"Over the last 60 days, we've fundamentally re-thought every part of our business and we will continue to actively consider all options, that allow Yahoo to put maximum effort where we can succeed," Thompson said in a memo that announced the job cuts to employees.
"Unfortunately, reaching that goal requires the tough decision to eliminate jobs, which means losing colleagues and parting with friends," the memo said, adding that the affected employees would be treated with "dignity and respect."
Thompson, who previously ran the PayPal division of eBay, has been under pressure to come up with a plan for turning Yahoo around.
The company's biggest shareholder, activist investor Daniel Loeb, has recently mounted a proxy challenge to replace board members whom Loeb has faulted for steering the company into its current decline.
In addition to the internal reorganisation, Yahoo has engaged in discussions to sell its holdings in two profitable Asian Internet companies, although those talks were reported to have stalled earlier this year.
Meanwhile, Thompson has also launched a controversial legal challenge to Facebook, in which Yahoo is demanding that the popular social networking service pay licensing fees for using technology that Yahoo claims is covered by its patents.
Facebook responded to that lawsuit this week by denying the claims and alleging that Yahoo should pay for using software tools that Facebook has patented.