The clash between Yahoo and Wall Street escalated Wednesday with an activist investor urging the beleaguered tech giant to dump its management team.

"The past year has been an extremely frustrating one for shareholders of Yahoo!," Jeffrey C. Smith,  managing member of hedge fund Starboard Value LP, said in a letter Wednesday to the company's board. "Yahoo’s current management has had over three years to demonstrate progress [but the company's core business] continues to be plagued with deteriorating financial performance and an accelerating number of executive leadership departures."

Yahoo chief executive Marissa Mayer has been under intense pressure to turn around the company. Over the last few years, Yahoo has spent billions on acquisitions and sought ways to profit from its large online audience. But investors appear to have lost faith, sending the company's stock down more than 30 percent last year. 

Under pressure from Starboard and other investors, Yahoo abandoned a plan late last year to spin off its interest in Chinese retailing giant Alibaba. The potential multibillion-dollar tax bill from such a deal would be too costly, investors argued. Instead, they said, Yahoo should sell or spin off its core business, including its iconic search engine and email services.

Yahoo has said it is considering its options, but Starboard appears to be losing patience. "If the Board is unwilling to accept the need for significant change, 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 and approach the situation with an open mind and a fresh perspective," Smith said in the letter.

Yahoo said in an statement that it is "in the midst of a multiyear transformation" and will share more information soon. "Our board and management team engage in and maintain regular, open dialogue with all our shareholders, and consistently strive to deliver and to maximize shareholder value," the statement said.

This story has been updated.