Nearly nine months ago, co-founder Jerry Yang replaced Terry Semel as CEO of Internet search icon Yahoo. The change in management was necessitated by Yahoo’s continued second place showing to rival Google in search market share and Yahoo’s subsequent lagging stock performance. Yang came in promising to reshape Yahoo into the Internet power-hitter it used to be.

Yang took the helm at Yahoo on June 18, 2007. A month later he published an open letter outlining his hopes, dreams and challenges as returning CEO. In that letter, he stated outright that there were no sacred cows at Yahoo. “While our business continues to grow, we need to dramatically improve our performance and I intend to put us back on a winning path.”

Since then, nothing much has happened until now. This week, with share prices hovering in the very-low $20’s, it looks like Yahoo is finally making a move to satisfy frightened investors. Yang’s new broom is poised to sweep the house clean.

This morning, many search media outlets are reporting that major lay-offs are coming to Yahoo operations around the world. Over the weekend, infamous former analyst turned business blogger Henry Blodget, wrote that Yang had Yahoo division heads compile a list of 1,500 to 2,500 employees who are to be laid off.

According to an article by Kevin Heisler, editor of Search Engine Watch, “… the only safe place at Yahoo right now: Right Media.”

It is going to be interesting and brutal to watch no matter what happens next. Yang has been pushed into a corner and several parts of the business sector are waiting to see how he reacts.

If Yang does not take action, chances are high that his company will lose even more faith in the search and investment communities. Though he can not afford to lose too much talent or even worse, free up that talent for competitors, Yang also can’t afford to wait any longer.

If the rumours are true, investors will be placated past next week’s looming quarterly revenue reports. Placating investors means a lot of extremely talented search technicians and managers are about to lose their jobs. Investors have been calling for renewal at Yahoo for several years and by virtually every account, there is a lot of fat to trim from the bloated ranks of Yahoo middle-management.

Talk of Yahoo’s troubles is also re-igniting speculation about deals, alliances or mergers between Yahoo and its competitors Google, Ask and MSN. Yang is in a unique but completely unenviable position. Whatever he decides to do this week will have years of impact on the entire search engine sector. We do live in interesting times.