Yahoo has confirmed it is axing about 2,000 posts, which amounts to 14% of its workforce being laid off.
It marks the sixth time in four years that the web portal has announced sizeable job cuts.
The news coincides with plans by Skype to create about 400 new posts across five cities.
The internet video-calling business - which is owned by Microsoft - said it was initially looking to take on staff in London and Stockholm.
Other posts will later be created in Tallinn, Estonia; Prague, Czech Republic; and Palo Alto in California, US.
Yahoo said its cuts aimed to deliver a"smaller, nimbler, more profitable"company that was cheaper to run. It added that the action was designed to save about $375m (£236m) a year.
The move follows a period of turmoil at the firm.
Carol Bartz was dismissed as chief executive in September after failing to turn around the company's fortunes. Chairman Roy Bostock and co-founder Jerry Yang also later resigned from its board.
In January, former Paypal executive Scott Thompson was named the organisation's fourth chief executive in five years.
A recent study by the analytics company Comscore suggested that Yahoo's share of online search queries in the USfell below 14% for the first time in February, putting it further behind Google and Microsoft.
A statement issued by Mr Thompson's said: "We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose -putting our users and advertisers first - and we are moving aggressively to achieve that goal."
It added that the firm would now focus on a "deep" personalised experience for users and a return on investment for investors.
The firm has not given any indication of when the cuts would be made. It said it would provide more information about its "future direction" when it released an earnings update on 17 April.
As Yahoo shrinks, Skype is growing. Once all the new positions are filled, the business expects to have 1,600 employees worldwide.
As part of the expansion it is launching a new technology centre in central London. It says the move would increase its headcount in the city by 40% to 330 posts.
The UK government's desire to monitor people using its services did not influence Skype's decision
It aims to have completed the first stage of the hiring process by the end of June.
Skype's vice-president of product and design told the BBC the new jobs would cover software engineering, product management and design.
"We have one project about 'big data', which is about making use of data that our users generate when using the product to improve the quality of the products we offer," said Rick Osterloh.
"We also a number of initiatives we are working on in the web area, and we are hiring some positions for our newly formed Xbox division."
Skype's move signals that it is not overly concerned about the UK government's intention to give the country's security services increased access to internet data.
Deputy Prime Minister Nick Clegg has specifically identified Skype as one of the services that the government wants to be monitored.
A statement from Skype said that: "We are not in a position to comment on the UK government's proposed legislation. We do of course comply with legislation in all countries in which we operate."
Skype's use of peer-to-peer technology for its call and instant-messaging services means that it does not store the contents of communications on its servers, and so could not hand the information over unless it changed its systems.