"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities," the firm's chief executive officer, Scott Thompson, said in a statement.
"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," he said.
Thompson said a "smaller, nimbler, more profitable" company will be "better equipped to innovate as fast as our customers and our industry require."
The company currently has a payroll of 13,700 workers.
Yahoo! said the company is expecting to save $375 million on an annualized basis. One-time charges of up to $145 million in severance pay and other restructuring expenses are expected in its second-quarter financial results