The company will now aim to spin off its struggling Internet business — essentially, everything associated with the Yahoo brand name — into a new company.
CEO Marissa Mayer plans to outline a cost-cutting reorganization late next month; many analysts speculate that Yahoo may simply sell off that business if the latest overhaul doesn't bear fruit quickly
The uncertainty and reshuffling threaten more distractions at a time when Yahoo is already struggling in digital advertising against rivals such as Google and Facebook.
Suitors might include AT&T Inc., Verizon Communications, Comcast Corp., IAC/InterActiveCorp and private equity firms that specialize in buying troubled companies.
Mayer said she believes Yahoo's Internet business in significantly better shape than when she arrived, largely because it is pulling in more traffic and advertising in the increasingly important smartphone and tablet market.
In the backdrop, Yahoo also has had to ward off a hostile takeover bid from Microsoft Corp. and quell shareholder uprisings spearheaded by activist investors Carl Icahn and Daniel Loeb.