Yahoo plans to reduce staff by a further 5%

Yahoo said on Tuesday that it would cut another 5 per cent of its workforce, on top of a 10 per cent reduction at the end of last year, and invest more in technology.

Carol Bartz, chief executive, who took charge of the company in January, said an economy-driven decline in advertising spending had depressed results in the first quarter more than some analysts had expected.

However, she said the 600-plus new job reductions were not in response to market conditions, but instead came from her “deep dive’’ into Yahoo operations and decisions about what properties the number two search engine could live without.

Ms Bartz said her top priorities were unifying the Yahoo platform around the world, so changes could be deployed more quickly; improving the quality of such top draws as Yahoo’s news, mail, sports, entertainment and finance pages; and making the advertising system more effective.

Blake Jorgensen, outgoing chief financial officer, told the Financial Times that many of the job cuts would be in global engineering and product teams and that Ms Bartz was acting in part to increase her ability to hire elsewhere in the company.

“We’ve tended to spread resources across everyone,’’ Mr Jorgensen said. Going forward, he said, Ms Bartz wanted to cut costs in small units and “double down on the places we know we can monetise’’.

In the first three months of the year, the company’s revenue fell 13 per cent to $1.58bn, below the average Wall Street projection, but reduced capital expenditure and other savings put cash flow slightly above expectations. Net income fell to $118m, or 8 cents a diluted share, from $537m and 37 cents a share in the corresponding quarter a year ago that included an extraordinary paper gain resulting from a revaluing of Yahoo’s stake in Chinese web company Alibaba.

Yahoo projected second-quarter revenue of roughly $1.52bn and income from operations of about $85m.

Ms Bartz avoided questions about the company’s renewed talks with Microsoft, but reiterated that Yahoo’s search business was critical for the company.

Asked whether she was “well-versed” enough in Yahoo’s search business to know how to respond to Microsoft’s entreaties, Ms Bartz said: “I’m well-versed enough in the search business at Yahoo to say it’s absolutely critical.”

She said it was also critical to have a combined search and display advertising business, so that marketers have multiple ways of reaching their targets with more than blue text links.

She told analysts not to conclude that all of the savings from the two rounds of job cuts and reduced capital expenditure would boost profits in the second half of the year, because she intended to spend to beef up the company elsewhere.

She said brand advertising would return as the economy improved and revenue per search would come back as people shopped to buy.