Yahoo is to cut 10 per cent in its workforce by the end of the year after a rotten third quarter exacerbated by falling display advertising sales.
This was Yahoo's third consecutive quarter of falling income and the company also revised downwards its expectations for the year's final quarter.
Beleaguered CEO Jerry Yang said annual operational costs of US$3.9 billion would be cut by US$400 million by the end of 2008.
Yahoo reported revenues of US$1.325 billion (â‚¬1.014 billion) after payments to partners. Analysts were looking for an average of US$1.369 billion.
Yang blamed the slowdown of display advertising, especially in finance and retail, as the US economy falters. Yahoo reduced its gross sales forecast for the full year to between US$7.18 billion and US$7.38 billion. The original figure was US$7.35 billion.
Last week Microsoft reiterated its lack of interest in acquiring any or all of the company after losing a series of epic struggles earlier in the year to do just that.
Yahoo is thought to be in negotiations with Time Warner regarding a possible merger with its AOL web unit. However, AOL is also struggling, having suffered a steep decline in subscriber numbers this year, so it's by no means clear that the merger of two flailing entities would result in a single successful one - it feels more like Time Warner wants the cuckoo at least part way out of the nest.
The advertising revenue share deal struck by Yahoo with its much larger rival, Google, earlier this year is under investigation by anti-competition authorities in the US and EU.