Wall Street was lukewarm on the move, after two previous CEOs failed to find an answer to rivals like Web-search giant Google and the Facebook social-networking site.

Sunnyvale, California-based Yahoo, which ended 2011 with some 14,000 employees, said it would save $375 million annually from the cuts, and will incur a pretax cash charge in the second quarter of $125 million to $145 million.

The company declined to comment on severance details.

Some analysts were skeptical about the layoffs, which had been widely expected.

"You can't cut your way to revenue growth," said Colin Gillis of BGC Partners. "What people want to see out of Yahoo is they want to see a plan and provision for revenue growth."

Thompson, who took over from the outspoken and occasionally profane Carol Bartz, argued the changes would transform Yahoo into a leaner outfit focused on its core businesses which were identified as "co re media and communications," "platforms" and "data."

"The changes we're announcing today will put our customers first, allow us to move fast, and to get stuff done," Thompson said in a memo to employees on Wednesday, obtained by Reuters, adding that the changes will results in a "smaller, nimbler, more profitable" company.

"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities," Thompson wrote.

Macquarie Research's Ben Schachter saw the layoffs as a start in determining the new direction of the company.

"Scott Thompson is not there to tweak the business," Schachter said. "He saw something in the assets to make him think there was potential."

A Yahoo spokeswoman said that every organization within the company was affected by the layoffs, but that some groups were affected more than others. She declined to specify which particular groups were the most affected.

Yahoo said it would provide more details of its plans when first-quarter results are released on April 17.

The layoffs follow Yahoo's declining revenue due to competition from Google and Facebook. Last year, Yahoo's revenue totaled $4.98 billion, compared with Facebook's $3.71 billion with just 3,200 employees.

Yahoo is also fighting a 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 percent stake in Yahoo, is the company's largest shareholder.

Yahoo's shares were down 0.9 percent to $15.04, in early afternoon trading, doing better than the broader Nasdaq market which was down 1.7 percent.

(Reporting by Sarah McBride in San Francisco; Editing by John Wallace, Maureen Bavdek and Tim Dobbyn)

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