While Yahoo's workforce has slowly grown as it acquired various small companies over time, its market share has stagnated.
Troubled web portal Yahoo is preparing to lay off 10% of its workforce, according to reports.
The cuts would reduce Yahoo's headcount by more than a thousand employees, and would affect all parts of the company.
Yahoo has not commented on the claims, but has said that changes are in the pipeline which will kick in before its fourth-quarter earnings call.
Activist investor Starboard has sent a letter to the company's board of directors demanding "significant changes", saying shareholders have lost confidence in the ability of the current management.
It says that the existing leadership "continues to destroy value" and that it is time "for the board to accept that significant changes are needed".
The redundancy report comes from Business Insider, which quoted unnamed sources at the company who are familiar with the layoff plans.
Shares in Yahoo lost a third of their value last year after it became clear that spinning off its stake in Chinese retailer Alibaba would incur a tax penalty.
The stake is worth $30bn, representing almost all of the market value of Yahoo.
While Yahoo's workforce has slowly grown as it acquired various small companies over time, its revenue and market share has stagnated.
Chief executive Marissa Mayer - a high-profile hire from Google - has promised to narrow the company's strategy and focus on newer products.