Jerry Yang, CEO of the world’s number two internet search engine company Yahoo! Inc., is doing his best to put a positive spin on Microsoft’s withdrawal of its bid for Yahoo!

But with Yahoo! stock tanking and rival search engine company Google continuing to out pace Yahoo! the question is whether Yang’s “what doesn’t kill you makes you stronger” is enough to revive the flagging internet giant.

Jerry Yang, who co-founded Yahoo! with David Filo, did at least say something about the failed Microsoft bid. He said:

The last 13 weeks have been a remarkable time here at Yahoo!. We’ve been living under the microscope in a way we never have before. There has been greater attention than ever on our strategy and our ability to execute against it. Some even questioned whether Microsoft’s unsolicited proposal would distract us from our mission, just as we were beginning to really push the pedal on our strategy.

Those people underestimated the determination of Yahoo!’s incredible people, spirit and culture.

But Yahoo! watchers note that “spirit doesn’t keep your stock around $30.”

The bottom line is that Jerry Yang and Yahoo! are facing some painful realities this morning after spurning Microsoft CEO Steve Ballmer.

According to Bloomberg, “Citigroup Inc. and ThinkPanmure LLC analysts cut their ratings on Yahoo’s stock to “sell” after Microsoft withdrew its offer. Microsoft said this weekend it walked away when Yahoo demanded $37 a share after the $44.6 billion bid was raised by about $5 billion to $33 a share.”

It’s important to remember that Yahoo’s troubles didn’t start with the failed Microsoft bid. Yahoo! shares fell 32% on the Nasdaq in the year before Microsoft’s offer. And rival Google expanded revenue more than three times faster than Yahoo last quarter.

Click here for a in-depth analysis of Microsoft’s bid for Yahoo!