Yahoo Inc said it would cut 5 percent of its global workforce and reported quarterly results that showed progress toward controlling costs, sending shares higher in an after-hours relief rally.

The Internet company said economic conditions remained challenging, as revenue on Yahoo Websites from both display ads and search ads 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 during the holiday week of December 25, 2009 through January 1, 2010.

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

Yahoo shares were up 54 cents at $14.92 in after-hours trading on Tuesday. The company`s stock is up roughly 9 percent from its Monday close of $13.66.

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

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

But she reiterated her belief that search is a very valuable part of Yahoo`s business.

"I`m well-versed enough in the search business at Yahoo to say it`s absolutely critical to Yahoo," Bartz said in response to a question regarding whether she is now familiar enough with the business to respond to an offer for search.
sections: World News