Yahoo launched an auction of its core business in February.
Starboard, which owns an estimated 1.7 percent of Yahoo, said it would nominate nine candidates as possible replacements.
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Yahoo said earlier in the month it took a $230 million impairment charge related to Tumblr and was considering strategic alternatives for its core internet business.
The move comes two days after Bloomberg reported activist investor Starboard Value LP was taking initial steps toward a potential proxy fight with Yahoo.
The layoffs take effect April 11 and affected employees received 60-day advance notice of the move
'We believe a simplified Yahoo will create greater shareholder value over the long term,' said CEO Marissa Mayer.
As many as 30 employees were said to have been let go, only to be later told that they were simply on a shortlist.
The layoffs, which would result in more than 1,000 people leaving the tech giant, is set to affect Yahoo's media business, European operations, and platforms-technology group.
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The embattled CEO announced her daughters' arrival on Tumblr.
The board cited 'tax risk' as its reason for the change of course.
There are rumors that the board is considering selling its core Internet business.