According to reports in the US, plans to shed a substantial number of its 14,000 global workforce, but has yet to decide which departments are likely to face cuts and by how much.
The internet giant has so far declined to comment on a specific number of job cuts, but has said its operations were currently being reviewed.
It is believed the exact figure will be revealed on January 29, along with its fourth quarter results.
Yahoo!, which has lost further ground in the search and ads market to arch-rival Google in recent years, is also considering lay-offs across its non-core European operations. The region was earmarked in November as one that needs to start matching performance levels in the US and Asia.
In a statement, Diana Wong, company spokeswoman for Yahoo!, said: "Yahoo! plans to invest in some areas, reduce emphasis in others and eliminate some areas of business that don't support the company's priorities."
Jerry Yang, Yahoo's founder and chief executive, is following a strategy of becoming a starting point for web consumers; extending ad functions for brands; and opening up the company's technology to third party developers.
Yang outlined the strategy last summer after replacing Terry Semel as chief executive in June.
In the third quarter, Yahoo's pre-tax profits dropped 5% year on year to $151m (£77.5m), but the company's online ad business showed signs of revival.
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