Yahoo's long, hard road to a turnaround just got a little tougher.

The Web pioneer today announced it would lay off 10 percent of its workforce by the end of the year, and reported a 64 percent drop in third-quarter profit from a year ago.

Yahoo's (NASDAQ: YHOO) revenue totaled $1.79 billion, a 1 percent increase from the same period last year. Minus traffic acquisition costs, or TAC -- the sums associated with reimbursing partners like Web site publishers that host its ads -- Yahoo posted net revenue of $1.325 billion, for earnings of 4 cents a share. Analysts polled by Thompson Reuters were projecting net revenue $1.37 billion, for earnings of 9 cents a share.

Company executives said the numbers slumped on the pervasive economic weakness that has constricted advertising budgets.

"Despite a tough environment, I remain very optimistic about Yahoo's future," CEO Jerry Yang said during a conference call with analysts. "Most display advertisers that are spending in this environment are spending with Yahoo."

The layoffs, which will see the exodus of more than 1,500 employees, are at the centerpiece of the company's aggressive cost-cutting strategy.

"While we are disappointed with our results, we’re pleased that we continue to benefit from the aggressive cost management efforts we have pursued during the year," CFO Blake Jorgensen said.

The results continue the slide for Yahoo, whose second-quarter profits fell 19 percent from the year-earlier period.

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For Yahoo, the pressure to prove that it can prevail as an independent company following the breakdown of acquisition talks with Microsoft (NASDAQ: MSFT) has compounded the broader economic woes weighing on the balance sheets of many companies.

Throughout those protracted, stop-start negotiations, Microsoft had offered to buy the company for as much as $34 per share. The initial offer of $31 was a 62 percent premium over where Yahoo's stock had been trading at the time, and prompted an investor frenzy that sent shares up 47 percent the morning the bid was announced.

Yahoo's stock dropped sharply when the talks broke down, and last week hit a five-and-a-half-year low.

Shares of the company dipped 6.1 percent today to close at $12.07.

Yahoo's resistance to the Microsoft buyout offer set in motion a parade of real and rumored negotiations about alternative deals, including a tie-up with AOL, which parent company Time Warner is in the process of separating. The most commonly suggested scenario for that deal would see Yahoo acquire AOL's media and advertising business and take a cash infusion from Time Warner in exchange for an equity stake. Time Warner would then be left with AOL's dial-up Internet access business, which the company is also considering selling.

That rumor persists, and could become a brighter prospect should Yahoo abandon a major advertising partnership with Google in light of ongoing regulatory scrutiny. That deal, itself a product of the Microsoft fallout, would see Yahoo import a portion of the ads it places on its search-results pages from its larger rival.

Yahoo has said it expects to generate an additional $800 million in annual revenue from the deal, but many advertisers -- and Microsoft -- have warned that it would ultimately drive up the price of search ads and pave the way for Yahoo's eventual exit from the search-advertising market, leaving Google with no viable competitor. Opponents have been calling for the government to block or apply conditions to the partnership.

The Department of Justice, along with about a dozen state attorneys general, has been investigating the antitrust implications of the partnership since June. Regulators in Canada and Europe are also reviewing the deal.

Google and Yahoo, which have been defending the arrangement as a means to broadening advertisers' reach while breathing life into the ailing company, did not need regulatory approval to implement the deal, but volunteered to postpone it to accommodate a review.

Earlier today, The Deal reported that Yahoo and Google were on the verge of scrapping the alliance as the DoJ appeared to be moving to intervene, citing lawyers familiar with the case.

The companies denied the report, but said that they had agreed to delay the deal to give regulators more time to evaluate it, the second time the companies have pushed back the deadline.

On other fronts, Yahoo has been moving steadily to open its platform. In the third quarter, the company unveiled its BOSS (Build your Own Search Service) program, through which other companies can access its search infrastructure. It also rolled out its new ad-management platform, which aims to streamline the processes of buying and selling online ads, and continued its push into the mobile arena with its Blueprint development platform.