Bluetooth Connections Issues after update Mac OS X Yosemite 10.10

Bluetooth connections issue seem to be a recurring problem with Apple’s latest software updates, as users running Mac OS X Yosemite 10.10 reported that the new Mac operating system has created connectivity problems with Apple’s own hardware including Magic Mouse, Magic Trackpad, Apple wireless keyboard, and third-party wireless accessories. The reported issue symptom including trouble connecting entirely and noticeable lag has been introduced since updating to Mac OS X Yosemite.

Workaround by removing Network Configuration and Preference Files:
1. Go to /Library/Preferences/SystemConfiguration/
2. Backup this folder
3. Delete all Network Configuration and Preference Files in this folder
4. Reboot

This forces Mac OS X to recreate all network configuration and preference files.