YAHOO SAID it would cut 5 per cent of its global workforce and reported quarterly results that showed progress towards controlling costs.

The internet company said economic conditions remained challenging, as revenue on Yahoo websites from display adverts and search adverts fell during the first quarter.

But the decline in revenue was offset by better cost controls, as new chief executive Carol Bartz seeks to revive Yahoo’s fortunes.

“People were really looking at the profit structure of the business and for things not to be falling apart,” said Kaufman Brothers analyst Jason Avilio.

Yahoo said last October it would cut about one-tenth of its workforce, or about 1,600 jobs. The company finished 2008 with roughly 13,600 employees and said it would take severance charges from the new round of layoffs during the second quarter.

The company also announced in an internal memo to employees on Tuesday that it planned to implement a mandatory shutdown of operations over a week next Christmas.

Yahoo said its operating cash flow, excluding certain items, was $409 million (€314 million) in the first quarter, at the high end of the $365 million to $415 million range it forecast in January.

Yahoo’s financial report comes as speculation has mounted that the firm has restarted discussions with software giant Microsoft about an internet search partnership, following last years failed merger negotiations.

Ms Bartz, who replaced Yahoo co-founder Jerry Yang in the top job in January, declined to comment on anything related to Microsoft.

However, she reiterated her belief that search is a very valuable part of Yahoo’s business.

Yahoo said staff being made redundant would be informed over the next two weeks.

The company employs about 300 in Dublin following its acquisition of internet advertising firm Overture.