The company said last week it would lay off 2,000 people or 14 percent of its workforce, and it set in motion a broad restructuring.

Thompson, a former PayPal executive credited with driving growth at eBay Inc's payments division, said in an internal memo on Tuesday the company would be organized along three core divisions beginning May 1. Commerce, an area of Yahoo's business that will receive new emphasis, will be critical to future growth, Thompson said.

Once the dominant Internet media and search company, Yahoo has been eclipsed by Google Inc and Facebook.

"To be very clear, our highest priority is winning in our core business, and that will earn us the right to pursue new growth opportunities," Thompson said in his memo.

Thompson, who was named Yahoo's CEO in January, will preside over an all-hands staff meeting later on Tuesday.

The company's three new divisions will include a consumer arm that will focus on media content under Ross Levinsohn and comprise "connections" like Flickr, search and email, and e-commerce.

A new "regions" division will deal with advertisers, while a technology division will handle Yahoo's infrastructure and platforms.

"You will hear more from our business leaders about their plans to move each of these groups forward in the coming days and weeks," Thompson said in the memo.

"Ultimately, only our customers will decide whether we win or lose in the market."

As expected, the new structure does away with a centralized products group that straddled several client types, formerly headed by Blake Irving, who will depart in coming weeks and is not expected to be replaced.

FROM MEDIA TO COMMERCE

Yahoo releases first-quarter results on April 17. On Tuesday, its shares were down 1.1 percent at $14.93 in early afternoon trade.

"Right now they're just trying to put all the pieces in place and trying to figure out some kind of coordinated way to move forward. It's pretty obvious the new leadership thinks they need to be leaner," said Michael Yoshikami, fund manager for Destination Wealth Management.

"All the reorg is really secondary to really figuring out what Yahoo wants to be."

Thompson's Tuesday memo also mentioned expanding beyond "traditional" e-commerce.

Yahoo will soon name an executive to head up a new team to wring more advertising revenue from existing businesses covering automobiles, shopping, travel, jobs, personals and real estate.

In media -- a key area for Thompson's predecessors -- the CEO plans to highlight Yahoo's customary news, finance, sports and entertainment pages, and work closely with content producers and editors on breaking news as well as pivotal events such as this year's Olympic Games and the coming U.S. elections.

The layoffs and internal overhaul come as Yahoo's revenue falls under competition from Google and Facebook. Last year, Yahoo's revenue totaled $4.98 billion, compared with Facebook's $3.71 billion, a number achieved with just 3,200 employees.

Yahoo is also fighting a battle with hedge fund manager Daniel Loeb, whose Third Point is the company's largest institutional shareholder with a 5.8 percent stake. Loeb is seeking to appoint four new board directors.

"It's time for Yahoo to move forward, and fast," Thompson said in his memo.

(Writing by Edwin Chan; Editing by John Wallace and Steve Orlofsky)

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