A key investor in Yahoo demanded Wednesday that the board of directors undertake a management change and warned it could push for a board shakeup if that did not happen.

Activist hedge fund Starboard Value said investors appear to "have lost all confidence in management and the board" after the company, led by Silicon Valley star Marissa Mayer, has failed to turn around Yahoo's struggling core Internet business.

In a letter to the board, Starboard said Yahoo needs to sell off the core business to other investors, but that so far the company has ignored expressions of interest from buyers.

"We are highly confident that there are interested and credible buyers for Yahoo's core business," it said.

"Yet, unfortunately, according to several credible media reports, Yahoo has thus far ignored this inbound interest. This is highly concerning to us."

Starboard said the current management thus "continues to destroy value" of the company and that the board "must accept that significant changes are desperately needed."

It said if the board is not willing to undertake significant changes in the company's leadership, "then an election contest may very well be needed so that shareholders can replace a majority of the Board with directors who will represent their best interests."

Last month SpringOwl, another sizeable Yahoo investor, demanded the company cut more than 80 percent of its workforce and replace chief executive Mayer.

The criticisms come after Yahoo reversed course in early December and decided not to sell off its lucrative stake in China's Alibaba and instead spin off its core Internet business.

Investors like Starboard point out that current market valuations of the company put the value of the core business at zero, and that selling it to investors would reap far more for investors than keeping the business.

"Despite over three years of effort and billions spent on acquisitions, the management team that was hired to turn around the core business has failed to produce acceptable results, in turn, causing massive declines in profitability and cash flow," Starboard said.

Yahoo shares were down 0.7 percent at $31.98 in early trade Wednesday. They have lost about 35 percent over the past year.