NEW YORK (CNNMoney.com) -- MySpace said Tuesday that it is laying off 500 employees, cutting its staff by 47%.
"Today's tough but necessary changes were taken in order to provide the company with a clear path for sustained growth and profitability," CEO Mike Jones said in a written statement. "These changes were purely driven by issues related to our legacy business, and in no way reflect the performance of the new product."
The company announced the long-rumored staff chop at the exact moment most of the tech world's attention was riveted elsewhere, on Verizon's hotly anticipated announcement that it will soon begin selling Apple's iPhone.
MySpace's management kept most of the site's developers but gutted nearly every other job role, according to a staffer who survived the cuts.
Once king of the social networking world, seven-year-old MySpace has fallen behind younger and nimbler rival Facebook. Acquired by News Corp. (NWS, Fortune 500) in 2005 for $580 million in cash, the site's active user base now hovers around 130 million -- far short of Facebook's 500 million.
Trying to reposition itself, the Los Angeles-based network recently rolled out a new interface focusing on music and social entertainment.
It also unveiled a Facebook link that allows MySpace users to integrate their profile data and log in through Facebook -- a move some took as a sign that MySpace is waving the white flag.
Jones tried to quash those rumors in his announcement of the company's deep layoffs.
"While it's still early days, the new MySpace is trending positively and the good news is we have already seen an uptick in returning and new users," he wrote.
But in a recent interview with Fortune, Jones acknowledged the sharp challenges the company faces in trying to rebuild.
"My belief is that MySpace got very, very diverse in its offering, and didn't really have a specialized service that users understood," he said. "As we broadened our service over time, I think we lost some of the core strategic functions that MySpace offered early on that delighted its customers."
More bad news for Sears. The iconic retailer may sell storied brands Kenmore and Craftsman as sales continue to plunge at Sears and Kmart and losses pile up. More
Andrew Crider lost his welding business and his home when the real estate market crashed. Now the Nevada man is offended by comments Donald Trump made showing the billionaire rooted for the housing collapse. More
A jury is currently deliberating a landmark court case between Google and Oracle that has broad implications for the software industry -- and could force Google to pay Oracle billions of dollars. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
When so many families are stuck having to borrow money to send their kids to college, these middle class students were able to graduate debt-free. More