Yahoo!, the embattled internet firm, will cut hundreds of jobs as part of a drive to increase profitability and convince shareholders that it is still capable of regaining the initiative from Google, it was reported today.

The exact number of redundancies from Yahoo!'s staff of 14,000 is not known but is expected to be announced at the end of the month — possibly at the time the company reports its fourth-quarter results, on January 29.

According to one report, a plan to scale back some activities will be presented to the board soon, and may be influenced by results.

Yahoo! would not comment specifically on staff cuts, but said in a statement: "Yahoo! plans to invest in some areas, reduce emphasis in others,and eliminate some areas of the business that don't support the company's priorities."

It added that it was continuing to hire in some areas.

In recent years Yahoo! has struggled against Google, whose share of the internet search market is more than three times as big, and has also faced competition from social networking sites such as MySpace and Facebook, as well as other players in the online advertising market, including Microsoft.

Last summer, Terry Semel, its long-standing chief executive, stepped down and was replaced by Jerry Yang, the founder of the company, who promised a wide-ranging review after criticism that Yahoo! was trying to do too many things rather than focus on its core priorities.

In October, Mr Yang said that Yahoo! would focus on three areas: becoming the 'starting point' for most consumers on the web, offering the most attractive proposition to companies wanting to advertise on the internet, and opening its technology platform for outside developers.

Since a peak then of $33.63, Yahoo! shares have continued to fall, and on Friday closed down slightly at $20.78, valuing the company at $27.8 billion (£14.2 billion).

Mr Yang's appointment came amid widespread shareholder dissatisfaction, and followed the leak of a highly critical memo from one of Mr Semel's senior staff that accused Yahoo! of trying to spread itself "too thinly" across the internet.

The letter was dubbed "the peanut butter manifesto".

In recent months, Yahoo!has said it will abandon several of its services, including Yahoo! 360, a social network site that never gained much momentum, and a music subscription service.

Yahoo! shares have fallen by more than a half since early 2006, but Mr Yang has said he will reject any attempt to take the company over or split it up.

Early last year Microsoft was reported to be considering a bid — possibly for as much as $50 billion — in an attempt to reign in Google, the runaway leader in the internet advertising market.

There has also been speculation that News Corp, parent company of Times Online, has considered combining MySpace, its social networking site with Yahoo! in return for a large share in the newly merged entity.

In the most recent quarter, Yahoo! said that its profit had fallen by about 5 per cent — to $151 million — in the previous 12 months.

Google's profit surged by 46 per cent, to $1.07 billion, over the same period.

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