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Yahoo also disclosed in a regulatory filing that it had amended a controversial employee severance agreement it adopted in February less than two weeks after Microsoft made its unsolicited offer to buy the Internet giant.

The amendments, which settled a lawsuit filed by investors, curbed severance payments that were assured to all Yahoo employees if they were fired or quit after being reassigned to a new job within two years after a Microsoft takeover. In some quarters, the changes were seen as an invitation to Microsoft to renew overtures.

The flurry of news got a rousing reception on Wall Street, as Yahoo shares shot up 9.9 percent. Yahoo’s performance helped lift the Nasdaq index up 1.2 percent.

But Yahoo’s share price, closing at $13.40, still paled against the unsolicited premium offer of $31 a share that Microsoft made to acquire the company Feb. 1 — an offer Yang rejected as insufficient. The Microsoft bid, long since rescinded, has cast a cold shadow over Yahoo and Yang’s tenure as its leader as the economy has worsened.

Yahoo, which is based in Sunnyvale and employs about 5,000 people in Silicon Valley, had announced plans to terminate 10 percent of its 15,000-member global work force in October, when the economic outlook was slightly less gloomy. On Nov. 17, Yang announced his intention to step down as CEO as complaints grew about his ability to lead the company he co-founded.

“The reductions we’re making are very hard but very necessary,” Yang said in a memo to Yahoo employees Wednesday. Calling it “a tough time for all of us,” he emphasized the need ”to better align costs with revenues — something businesses in virtually every sector are also having to do.”

New names have surfaced as Yang’s potential successor. In recent days, former Adobe CEO Bruce Chizen was cited by Bloomberg News, and former Vodafone boss Arun Sarin was named by the Wall Street Journal.

The company declined to comment on outside candidates while confirming that Yahoo President Sue Decker is under consideration. Chizen, highly regarded for his leadership of Adobe, is also said to be considering a role with a private equity firm.

Yahoo declined to specify how many valley workers were targeted by the layoffs. One unit shuttered was Yahoo’s San Francisco-based “Brickhouse,” once ballyhooed as an idea incubator. Some of its teams were being reassigned within Yahoo, spokeswoman Kim Rubey said.

One former Yahoo executive said Silicon Valley-based engineering jobs were thought to be more vulnerable in the new layoffs as the company pushes more work to its offices in Bangalore, India. Rubey declined to comment directly on that issue but noted that in a recent quarterly earnings call, Yahoo executives said they were evaluating relocating some operations to “lower-cost geographies.”

Yahoo has long been regarded as one of the Web’s leading brands and remains one of the world’s most popular sites, but its fortunes have flagged with the rise of Google. Microsoft’s rivalry with Google and its desire for a stronger presence on the Web led to its unsolicited, ill-fated bid for Yahoo.

Yahoo was struggling when Yang was named CEO in June 2007 to try to reclaim some of its luster. His tenure was marked by his opposition to Microsoft’s entreaties, which led to criticism from activist shareholders led by billionaire Carl Icahn. Icahn denounced as “obscene” the employee-severance policy that would have made a Microsoft takeover of the Internet company more costly.

Another substantial shareholder, Ivory Investment Management, sent a letter Wednesday urging Yahoo to renew negotiations to sell its search operations to Microsoft. Some analysts think Yahoo would be worth more if it sells off parts of the company.

The letter from Ivory, which owns about 1.5 percent of Yahoo, criticized the company’s management and emphasized the need for both Yahoo and Microsoft to better compete with Google.

Although it trails Google by a wide margin, Yahoo’s search engine is the Internet’s second most popular, with a U.S. market share of about 20 percent, according to comScore. Microsoft’s search engine ranks third at 8.5 percent.

“It is widely acknowledged that neither company has kept pace with Google’s innovation and investment spending,” the letter said. “As a result, both companies appear to have fallen further behind in a business area they have each repeatedly referred to as a top priority.”

A search deal with Microsoft remains a viable option, said Stanford Group analyst Clayton Moran: “The pressure should be mounting for them to talk because there is no good explanation for them not to be doing so at this point.”

The Associated Press contributed to this story.

Kevin Johnson made news earlier this year for his role in the attempted takeover of Yahoo by Microsoft, where he was head of its Windows and Internet unit.

He made news again when he accepted an offer to become chief executive of Juniper Networks, the Sunnyvale maker of networking equipment.

Johnson generated yet more news last week when details of his employment agreement with Juniper were filed with the Securities and Exchange Commission.

Among the cornucopia of goodies with which Juniper wooed its new CEO, one caught our eye: a $5 million signing bonus that was the largest we can remember in more than 20 years of tracking executive pay in Silicon Valley.

The hiring bonus will be doled out over three years: $1.5 million for his first year, another $1.5 million for his second, and the final $2 million for his third.

Johnson’s package includes something else we don’t recall seeing before: a mortgage interest “buy down” that will allow him to pay off more of the loan’s principal in the first three years of the loan.

Juniper may have decided to stretch these benefits over multiple years after losing its previous chief operating officer, Stephen Elop, in January after just a year’s worth of service. In addition to the 75,000 shares of restricted stock that vested at the time he gave his notice, Juniper also shelled out $200,000 to Elop in “relocation reimbursement and benefits” that included travel costs between his home in Canada and Juniper’s offices in Sunnyvale. He never moved here before he found a new job. In Washington state. At Microsoft.

Juniper’s new CEO will also get unspecified “assistance” selling his old home and help buying the new one, including closing costs that could total as much as 2 percent of the new loan amount.

Johnson, who will be paid $800,000 a year in salary, will be awarded an option for 1.4 million shares of Juniper priced at the close on the day they are granted, a date not spelled out in the filing. He is set to begin work Sept. 8 and will get a second option on 200,000 shares “following the commencement” of his employment.

Together, the option grants are equal to 10.8 percent of the total options Juniper granted to its entire workforce last year. And he’ll have the chance to earn 350,000 shares of stock free and clear, based on the company’s performance from now through 2012.

New jet-setter: Symantec’s chief executive, John Thompson, joined an exclusive group of Silicon Valley chief executives such as Larry Ellison of Oracle and Apple’s Steve Jobs, whose companies now use aircraft they own or control for business use, according to the company’s proxy filed Monday with the SEC.

In May, Symantec agreed to lease an aircraft from a company owned by Thompson. It will pay $1,250 per flight hour, plus operating costs of Thompson’s business travel on the plane.

Thompson will no longer be using the company’s aircraft for his personal use, a benefit worth an average of more than $162,000 in each of the past four years, as the company will instead be paying to use Thompson’s jet for its business use.

The proxy assures us that “the amounts billed by Mr. Thompson’s company for our use of the aircraft are at or below the market rates charged by third-party commercial charter companies for similar aircraft.”

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