Jerry Yang After Saying "No" to Microsoft's Offer

This is a guy who sucked so many eggs, that he decided to say “no” to Microsoft’s buyout offer, even though they were offering a MASSIVE premium to Yahoo’s stock price.

Just so you know, that offer was to buy Yahoo for over $40 a share. At the time of the offer, it was trading under $30 a share. Today, Yahoo trades at $12.

It’s not that shocking that Jerry Yang was compelled to give up his position at Yahoo. After all, he lost shareholders one of the most lucrative paydays ever (right as the economy was plummeting).

But believe me when I say that Jerry Yang leaving is good news. Just take a look at the chart below to see why I think that…

What’s interesting about this chart is that Yahoo prices bottomed right as Jerry Yang was leaving Yahoo (he resigned on November 18th).

After that announcement, shareholders took Yahoo stock up over 40%. And since then, Yahoo has continued to make higher lows in an attempt to rally past $14 a share.

Adding strength is the fact that the Slow Stochastic (at the bottom of the chart) is oversold right now.
Oversold means just what you think it does – something has been sold too much. And if something has been sold too much, then eventually buyers will swoop in and snatch up shares at the more attractive, lower prices.

If you notice, the previous two times Yahoo was oversold, it went on to rally at least 15%.

While it is oversold, we also see Yahoo hitting the bottom of its newly formed support channel. And lastly, we see Yahoo starting to use its 50-day moving average as a support, not resistance.

This means Yahoo shares are primed for a climb over the next two weeks. Buying shares is a great move, but buying call options is a better one.

Bartz served as Autodesk’s president and CEO for 14 years before stepping down from the post in April 2006. She remained chairwoman, and will continue in that role until Autodesk fills the position.

“We are very excited to have Carol Bartz leading Yahoo into its next era of growth. She is the exact combination of seasoned technology executive and savvy leader that the Board was looking for, and we are thrilled to have attracted such a world-class talent to Yahoo,” Yahoo Chairman Roy Bostock said in a statement.

“The Board is united in its view that her energetic and decisive leadership style, coupled with a proven track record of driving growth, operational excellence and shareholder value, is exactly what Yahoo! needs to get back on a path toward achieving its full potential,” he added.

Yahoo President Susan Decker, who had been a candidate for the CEO position, will resign after a transition period, the Sunnyvale, Calif. company said in a statement.

Yahoo’s news release was quick to mention that Autodesk’s revenue nearly quadrupled and stock value increased almost ten-fold during Bartz’ tenure.

Both issues are thorns in the side of disgruntled Yahoo shareholders, especially billionaire investor Carl Icahn, who publicly chastised Yang for passing on a $47.5 billion, or $33 a share, acquisition offer from Microsoft Corp. (MSFT).

Yahoo’s profits have fallen 10 of the past 11 quarters, and its shares have fallen more than 60% from their 52-week high of $30.25 a share. Still, Microsoft CEO Steve Ballmer is open to a partnership with Yahoo.

Bartz said she’s looking forward to take Yahoo “to the next level.”

“There is no denying that Yahoo has faced enormous challenges over the last year, but I believe there is now an extraordinary opportunity to create value for our shareholders and new possibilities for our customers, partners and employees,” she said. “We will seize that opportunity.”

While few candidates have as much executive experience – especially in Silicon Valley – as Bartz, some question whether she has the right experience for the job.

“She seems to me to be more of a builder than a buyer-and-flipper,” Needham & Co analyst Richard Davis told Reuters. “I’m sure that plenty of people wanted to buy Autodesk over the years.”

Bartz didn’t get into specific plans during a conference call. And Ralph Whitworth, founder of San Diego-based Relational Investors LLC, which bought 9.2 million Yahoo shares in the third quarter of last year, said he’s expecting transparency and speediness.

“There’s high expectations and low patience,” Whitworth told Bloomberg. “I would say within the next 90 days, there should be clear direction.”

Source: Yahoo Names Carol Bartz New CEO

Yang was elected CEO in June 2007, his second go-around at that post. Since then, Yahoo’s market value has fallen by more than $20 billion, according to Bloomberg.

To be fair, Yahoo was already losing its market share to Google Inc. (GOOG) and a healthy percent of its share value as a result.

But Yang was brought back to fix that.

There was a deep feeling within Yahoo’s ranks that Yang wasn’t fit to continue leading the company out of the mire – or least into a profitable merger/acquisition situation – because he had burned too many bridges trying to get what he felt was the fair value of Yahoo’s shares.

In the year and a half he ran the show, Yang sternly rejected several takeover offers from Microsoft, including a $47.5 billion bid that amounted to $33 a share. The offer valued Yahoo’s share at a 62% premium at the time.

This led to a proxy battle instigated by board member Carl Icahn, who wanted to oust Yahoo’s board of directors and replace it with candidates of his choosing. Icahn – it should be noted – favored a Yahoo partnership with Microsoft over Google.

Earlier this month, Google walked away from a plan announced in June to sell advertisements on Yahoo’s pages after the Justice Department threatened to block the deal on antitrust grounds.

Google already has more than 70% of the search-engine driven advertising market. Yahoo has about 10%, according to BusinessWeek. For Yang, it was a chance to revive falling sales, as profit has dropped in 10 of the last 11 quarters.

And that’s caused the company to shed a lot of dead weight.

Last month, it announced 1,500 job cuts. And, Scott Moore, the senior vice president in charge of the company’s media group, recently announced he, too, is leaving.

In addition to Moore, Yahoo shed five top executives this past summer: Jeff Weiner (executive V.P. of the network division), Brad Garlinghouse (who oversees e-mail and instant messaging), Vish Makhijani (general manager of web search), Qi Lu (top engineer for search marketing) and Joshua Schachter (founder of social bookmarking site, delicious).

So Now What?

Instead of first saying that Yang is stepping down, Yahoo’s news release begins by announcing it has begun a search for a new CEO.

Yahoo Chairman Roy Bostock said the company is searching internally and externally for candidates, and is being aided by executive search firm Heidrick & Struggles.

“Jerry and the Board have had an ongoing dialogue about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level,” Boystock said in the release.

Some of those candidates include Yahoo President Susan Decker. Other names floated include Jonathan Miller, the former chairman of AOL; Dan Rosensweig, once Yahoo’s operations chief; and Meg Whitman the former chief of Internet auctioneer EBay Inc., Bloomberg reported citing UBS analyst Ben Schachter.

Whoever gets the job is getting a difficult one with high expectations.

But one could argue that Yang’s follies lowered expectations. At this point, it’s understood that Yahoo can’t unseat Google as the world’s top search-engine advertiser – at least on its own.

Many board members and shareholders wanted Yang to sell Yahoo to Microsoft. If not that, then find another partnership to gain at least some traction against Google.

Before Yang’s departure, Yahoo’s shares dipped to $9.75, their lowest level since 2003. And on top of all of Yahoo’s problems, the global stock market is bracing for a cold year.

There’s a good chance that the role of Yahoo’s next CEO won’t be leading the company out of its mess, but instead wave the white flag in front of a company that can.

Source: Yang Steps Down, Yahoo CEO Search Commences

Google rubbed more sand in Yang’s eyes Wednesday when it walked away from a plan announced in June to sell advertisements on Yahoo’s pages after the Justice Department threatened to block the deal on antitrust grounds.

Google already has more than 70% of the search-engine driven advertising market. Yahoo has about 10%, according to BusinessWeek.

For Yang, it was a chance to revive falling sales, even if it meant falling on his sword instead of wielding it against its chief rival.

Now, his shareholders are livid. His future is uncertain. And his best option for survival is a partnership with Microsoft Corp. (MSFT) – the company whose generous takeover offer he rebuffed earlier this year.

The dropped advertising deal between Yahoo and Google revealed a major growth problem for each company.

For Google, it shows that the search engine juggernaut has grown so large that it now has far fewer legal avenues of expansion open to it.

For Yahoo, it shows that Yang is running out answers for Google’s market dominance.

Yahoo’s Troubles

Yahoo has had little to cheer about in the past year.

Its sales growth fell to 3% in the third quarter, down from 14% over the same period last year. Profit has dropped in 10 of the last 11 quarters, Bloomberg reported.

Last month, it announced 1,500 job cuts. And, Scott Moore, the senior vice president in charge of the company’s media group, recently announced he, too, is leaving.

In addition to Moore, Yahoo shed five top executives this past summer: Jeff Weiner (executive V.P. of the network division), Brad Garlinghouse (who oversees e-mail and instant messaging), Vish Makhijani (general manager of web search), Qi Lu (top engineer for search marketing) and Joshua Schachter (founder of social bookmarking site, delicious).

In the past year, the company’s stock value has more than halved – from just under $30 per share to under $15 a share, including hitting a 52-week low of $11.25 last week.

During that time, Yang sternly rejected several takeover offers from Microsoft, including a $47.5 billion bid that amounted to $33 a share. The offer at the time valued Yahoo’s share at a 62% premium.

This led to a proxy battle instigated by board member Carl Icahn, who wanted to oust Yahoo’s current board of directors and replace it with candidates of his choosing. Icahn – it should be noted – favored a Yahoo partnership with Microsoft over Google.

“I don’t regret any minute of what happened, even though it wasn’t the most fun thing to go through,” Yang said Wednesday at a press conference, Bloomberg reported.

What’s Next for Yahoo?

With or without the deal, Google’s market dominance will grow. Nothing has slowed it down thus far, and competition such as Yahoo, Microsoft, Time Warner Inc.’s (TWL) AOL, and IAC/InterActiveCorp.’s (IACI) Ask.com aren’t gaining any ground.

Yahoo’s only fighting chance is to team up with one or several of them

Yang’s only real chance may be going back to deal with Microsoft.

“To this day, I’d say the best thing for Microsoft to do is buy Yahoo,” Yang said during an appearance at the Web 2.0 conference in San Francisco, Dow Jones reported. “We’re willing to sell the company.”

Of course, there’s no guarantee Microsoft is still interested.  At the very least, the company could still be jaded from repeated rebuttals in the past year. And the fact that Yahoo also is in talks with AOL won’t help.

JPMorgan Chase & Co. (JPM) analyst Imran Khan wrote in a research note that a good solution would be fir Yahoo to sell its search operations to Microsoft, a deal Microsoft previous proposed and Yahoo rejected.

Striking that kind of a deal would save Yahoo an estimated $1.4 billion and allow it to focus on its aesthetics, such as ad displays, Khan said.

“We think continued investment in search, at the expense of display investment, has given competitors the opportunity to bite into Yahoo’s leading display ad market share,” Khan wrote.

But Yahoo’s board – many of them already feeling slighted by Yang – may consider another move: Have Yang walk to plank.

Since Yang climbed back aboard as Yahoo’s CEO in June 2007, the company’s sales, market share, and market value have all decreased.  That doesn’t bode well for a CEO who could have avoided another horrendous quarter and shareholder insurrection simply by agreeing to Microsoft’s $47.5 billion bid earlier this year.

Source: Yahoo! Searching for Answers After Google Walks Away from Ad Deal

But while Yang insists the deal will generate an extra $800 million a year in revenue, shareholders and analysts alike are skeptical the company will be worth the $33 a share Microsoft Corp. (MSFT) was offering just months ago.

In accordance with the deal reached last week, ads from both Google and Yahoo will appear on Yahoo’s search results. Yahoo has acknowledged that Google is more efficient in targeting online search audiences, estimating the larger search engine generates up to 70% more revenue per click for its ads. And it hopes that access to Google’s AdSense technology will enhance its own targeting capabilities.

According to Yahoo, the deal could boost cash flow by $250 million to $450 million in the first 12 months of implementation.

Google, on the other hand, will receive added revenue from having its ads posted on the country’s No. 2 search engine.

“Clearly, it is time to move on, and we believe that this agreement with Google does so by strengthening our competitiveness,” Yang said in a statement.

What Yang would like to move on from is a $44.6 billion failed takeover bid from Microsoft that would have netted Yahoo shareholders $33 a share.

Yahoo- which has suffered through eight straight quarters of declining profits- rejected Microsoft’s offer Feb. 11, saying it substantially undervalued the company’s worth. The original $31-per-share offer valued Yahoo at a 62% premium on Feb. 1.

After its second bid was rejected, a frustrated Microsoft turned its back and walked away. This infuriated Yahoo shareholders who had seen the bid as the company’s last chance to regain profitability. A contingent led by Carl Icahn instigated a proxy battle, seeking to oust Yahoo’s current board of directors and replace it with candidates of his choosing.

Icahn owned 10 million Yahoo shares and options to buy 49 million as of May 15, Bloomberg News reported. Investors BP Capital LLC Chairman T. Boone Pickens and hedge-fund manager John Paulson are reportedly backing his slate of nine directors, which includes himself and former Viacom Inc. (VIA) chief Frank Biondi Jr. The attempted coup has major ramifications for the Google deal in that it will be void should Icahn win the battle.

Also, if Microsoft- which Icahn has worked desperately to woo back into discussions- changes its mind and makes another off for the company, it will have to pay Google $250 million to end the partnership.

In addition to interference from activist investors, the deal will also have to clear regulatory hurdles as it couples the nations two largest search engines. Both companies have said the deal does not require regulatory approval, but that they would delay its implementation for up to three and a half months to give the U.S. Department of Justice a chance to review it.

“This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns,” Sen. Herb Kohl (D-Wisc.), chairman of the Senate Antitrust Subcommittee, said in a statement. “The consequences for advertisers and consumers could be far-reaching and warrant careful review, and we plan to investigate the competitive and privacy implications of this deal further in the Antitrust Subcommittee.”

Microsoft has said in the past that a deal between Yahoo and Google would consolidate more than 90% of the search ad market.

However, even if the deal goes through, Yahoo is basically relying on its biggest rival for growth. Both Merrill Lynch & Co. Inc. (MER) and Citigroup Inc. (C) have cut their estimates on Yahoo’s stock price saying advertisers will likely shift more spending over to Google.

Yahoo’s stock fell as low as $21.83 a share, Friday, down more than 7% from Thursday’s close. Even if the deal lives up to Yang’s billing, it seems unlikely the stock will reach the $33 a share Microsoft had offered any time in the near future.

“This [deal] just reaffirms the view that Yahoo, and particularly Jerry Yang and [cofounder] David Filo, blew it,” Mark May, an analyst at Needham & Co. told Bloomberg. “It’s going to be hard for Yahoo to come back from blowing what might be, looking back, the major milestone in Yahoo’s corporate history.”

Source: Yahoo Grasping at Straws with Google Deal

Two weeks ago, Yahoo Chairman of the Board and co-founder Jerry Yang rebuffed Microsoft’ $47.5 billion (or $33 a share) bid, sending shares down $4.43 (or 15%) to $24.24. That of course didn’t bode well for Icahn, who said he owns 59 million Yahoo shares.

“The board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft,” Icahn said in his letter. “I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.”

If necessary, Icahn’ strategy is to seek antitrust clearance from the Federal Trade Commission to purchase up to $2.5 billion worth of shares – about a 6% stake. Also, with all of Yahoo’ 10 board members up for re-election on July 3, Icahn will move to nominate his own list of board candidates, one being Mark Cuban.

Reviving talks with Microsoft won’t be easy, as rhetoric increasingly intensified between Yang and Microsoft CEO Steve Ballmer during takeover negotiations.

But if anyone has the experience and moxie to push talks further, it’ Icahn, who has used his clout to push action at struggling mobile phone pioneer Motorola Inc. (MOT) and drugmaker ImClone Systems Inc. (IMCL).

Most recently, Icahn has been at the forefront of Blockbuster Inc.’ (BBI) up-to $1.35 billion bid for Circuit City Stores Inc. (CC). If that deal falls through, Icahn said he would acquire the struggling electronics retailer.

In his letter to Yahoo, Icahn said the board “completely botched” a successful merger with Microsoft and that he is acting on shareholders’ behalf to establish a new board.

Icahn also penciled his name in as one of the nominees for Yahoo’ board.
“I think he’ playing his cards pretty smart here,” Troy Mastin, an analyst at William Blair & Co., told Bloomberg Television. “I wouldn’t be surprised to see Microsoft and Yahoo together in the next few months.”

Source: Yahoo ‘Completely Botched’ Microsoft Merger 

“Give me a chance to get my coat off!” came the reply.

One de-coating and a cup of tea later, and Theo was buzzing.

“Jerry Yang just pushed his luck,” he said, referring to Yahoo’s chief executive. “Microsoft were bidding $33 a share; Yang and his board wanted $37. No dice!”

Let’s not forget, before the bid started Yahoo’s share price was below $20. The troubled courtship with Microsoft has served Yahoo shareholders well.

But yesterday the share price took a tumble when the deal looked to be dead. There’s an important lesson investors can draw from all this. It shows how a cantankerous CEO can sometimes turn down a good deal on your behalf.

Now the deal looks like it might go ahead after all. Yang is under pressure from his ultimate bosses – the shareholders. They want to know what plans he has to get the shares from where they currently are – around $25 – to the $33 they would have pocketed from Microsoft.

Theo also points out the contrast with the M&A frenzy of the last few years. When credit was cheap, speculative investors would load up on potential merger and acquisition targets, hoping to bag a nice premium from the predator firm. It was risky, but the potential rewards were worth it (witness the huge premium Royal Bank of Scotland paid for ABN Amro).

If one deal fell through, there was always a reasonable chance someone else would take the suitor’s place. But that was all pre-credit crunch. Yahoo’s share price tumble yesterday showed that such optimism has evaporated from the markets.

“This sort of M&A play is too risky now,” says Theo. “And that goes for Yahoo as well. Stay away!”

I would have gotten away with it if it wasn’t for that pesky Frank Field!

Labour rebelmeister, Frank Field, is brandishing his trouble-making stick again. Get ready for round two of the 10p tax fight!

Gordon Brown must just wish this issue would go away. It was Brown who, as Chancellor last year, got rid of the rate (a move he must surely now rue). Now, as Prime Minister, he’s presiding over the farcical consequences.

It’s estimated that the change will leave 5.3 million people worse-off (incidentally Gordon the Stubborn is disputing this figure, even though both the Treasury and the Institute for Fiscal Studies have confirmed it).

The Government faced down a backbench revolt by promising to ensure the worst-affected were compensated. Alistair Darling promised to make it all good again. This placated the rebels… for about a week. Now they’ve returned to ask the inevitable question: “Hang on… what are you actually going to do?”

Ah, there’s the rub. Brown says precise measures have been announced. But the message doesn’t seem to have reached his own party. Field and other MPs are baffled by the assertion.

Recommended

Cash in on the loophole Google doesn’t want you to know about!

Imagine cash filling your bank account – on autopilot… Imagine how great life would be if you claimed a guaranteed income each month – with NO day to day work!

Now it’s possible: Just take advantage of the loophole Google doesn’t want you to know about! This is a lucrative, LEGAL ‘crack’ in the Internet… In fact, ANYONE with half a brain can cash in…

Would you like to?

Click here to find out more

And how bad will it look if the Treasury refuses to publish this data.

Brown and Darling are like schoolboys who haven’t done their homework (though, as noted above, Brown insists he has). Now they’re being asked to show teacher their sums…

It’s all just so embarrassing, isn’t it?

But the tough times are just beginning for Yahoo, which must now prove why it is worth more than the lofty price Microsoft was offering.

“Yahoo is going to be under a lot of pressure,” Peter Falvey, managing director at technology-merger adviser Revolution Partners, told Bloomberg News. “A lot of shareholders are going to say, ‘Hmm, maybe we overreached.’”

Microsoft originally offered $31 per share in either cash or Microsoft stock, a 62% premium to Yahoo’s Feb. 3 closing price. It boosted the bid to $33 a share, appraising Yahoo at approximately $47.5 billion, but Yahoo refused to accept anything less than $37.

Now, at $24 a share, Yahoo as a company is only worth about $33.5 billion.

That means Jerry Yang, Yahoo’s co-founder and chief executive, has the unenviable task of delivering better performance after Yahoo’s bold reprisal. In short, he’ll have to add at least $14 billion in market value to the company if he’s going to justify his decision and prove that rejecting Microsoft’s offer was the right move.

And one doesn’t have to take a very long look at Yahoo to see Yang has his work cut out for him.

Why Yahoo! Isn’t Worth $37 a Share

Last month, Yahoo reported a first-quarter profit of $542 million, or 37 cents per share, up from $142 million, or 10 cents per share last year. It was the company’s first profit increase in nine straight quarters (more than two years). But a big reason for the jump was a one-time gain of $401 million – a windfall from the sale of Yahoo’s stake in Alibaba.com Ltd.’s (PINK:ALBCF), which came from the Asian Internet company’s initial public offering (IPO).

Excluding one-time items, Yahoo reported earnings of 11 cents a share.

Even with the profit increase, the company continued to lose market share to nemesis Google Inc. (GOOG), the leader in Internet search. Yahoo accounts for 21.3 % of all U.S. searches according to comScore Inc.

That compares with a near 60% sway for its rival, Google, which defied Wall Street’s first-quarter expectations by expanding its revenue nearly four times faster than Yahoo. While Yahoo’s sales climbed 14% last quarter, Google posted a 46% jump in revenue. In April, Yahoo all but acknowledged Google’s victory by outsourcing a small portion of its search advertising to its competitor on a two-week trial basis. If Yahoo continues using Google’s search advertising system, it will be abandoning its own “Panama” ad system. Launched in February, the Panama initiative set the company back millions of dollars. Even so, it continues to lag behind Google’s AdSense in terms of revenue per search query.

As it worked to bulk up its search capabilities, Yahoo had earlier shelled out $1.63 billion for Overture Services and $235 million for Inktomi. That’s close to $2 billion for search engine service specialists that would for, all intents and purposes, be rendered moot should Yahoo ultimately outsource even more of its search-related business.

While some analysts believe a bigger deal with Google may already be in the works, any serious collaboration between the United States’ two largest web portals would very likely run afoul of U.S. antitrust restrictions. Google already places ads on more than 67% of searches. The addition of Yahoo would expand its influence to 89% of searches, according to statistics from Hitwise. Microsoft said last month that Google would command more than 90% of the search advertising market.

“While Yahoo may pursue a Google search partnership as a way to appease shareholders through enhanced cash flow, we believe such a deal would face intense anti-trust scrutiny,” Clayton Moran, an analyst with Stanford Group Company, told IDG News Service. “In addition it would cede control of search to Google.”

Moran does not believe Yahoo’s stock will reach the $37 a share value over the next 12 to 18 months.

There have also been rumors that Yahoo will join forces with Time Warner Inc.’s (TWX) AOL or News Corp.’s (NWS) Fox Interactive Media business units. According to the details that have emerged so far, Time Warner would merge a large portion of AOL’s operations with Yahoo and make a cash investment in exchange for a 20% stake in the resulting company. Yahoo would use that cash infusion to buy back some of its own stock.

However, when it comes to Web-search market share, AOL currently ranks fourth, behind Google, Yahoo and Microsoft. So the company that emerged from that combination would be more of a content player than it would be a competitive Web-search firm.

Regardless of what Yahoo does to try to validate its decision to rebuff Microsoft, investors are already working themselves into an apoplectic frenzy over the move. Some Yahoo shareholders had already sued the company’s directors even before Microsoft decided to walk.

Enraged Yahoo shareholder Eric Jackson said Sunday that he planned to rally shareholders to withhold their votes from all Yahoo directors at the company’s annual meeting, which has not yet been scheduled. Jackson leads a group of about 140 shareholders who together own 2 million Yahoo shares.

“Significant value was left on the table,” said Jackson, who heads a group of irate investors who together own about two million Yahoo shares.

Microsoft’s Next Move

In an ironic twist, Microsoft – like Yahoo – must now answer to a less-than-thrilled constituency.

Microsoft Chief Executive Steve Ballmer said April 24 that his company was willing and able to walk away from its bid for Yahoo.

“We’re prepared to move forward without a merger with Yahoo,” Ballmer said at a technology conference in Italy. “We think the best way to move forward quickly is to come together with Yahoo. Hopefully that works. But if it doesn’t, we go forward. Time is money.”

He lived up to his word Saturday, scrapping his company’s a $47.5 billion offer that valued Yahoo shares at a 70% premium to their January value after three agonizing months.

But now the man in charge of Microsoft must explain how the company plans to improve its eroding Internet business – which lost $228 million in the first quarter alone – without Yahoo.

Instead of the stock-price rally that many companies enjoy when they walk away from costly deals, Microsoft’s shares closed the day yesterday at $29.08, down 16 cents – hardly the vote of confidence the company would have wanted to see.

Since the company obviously has plenty of cash on hand, it may be a good idea to seek out a more agreeable partner.

“I’m looking for Microsoft to get aggressive with a buying spree,” Gartner analyst Allen Weiner told IDG. “I think Microsoft should do something quickly to show the world that [the] Yahoo bid wasn’t a setback.”

The company could try to strike a deal of its own with Time Warner or News Corp., or perhaps even with the trendy Facebook.com. Other analysts suspect Microsoft may be beckoned back to Yahoo’s rescue if the company fails to right its course by year’s end.

“Should Yahoo miss expectations in 2008, we would not be surprised to see MSFT come back to the table,” RBC Captial analyst Ross Sandler said in a report yesterday morning.

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!

In a statement, the software giant said it failed to win over Yahoo’s board of directors – even after boosting its bid by $5 billion. To move forward from here would require a shift into hostile mode, Microsoft said, a time-consuming and uncertainty filled process that would make Yahoo “undesirable as an acquisition candidate.”

“After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,” Microsoft Chief Executive Officer Steven A. Ballmer said in a statement.

It’s only been three months after heavyweight Microsoft launched its half-stock, half-cash buyout offer for Yahoo, offering a 62% premium over Yahoo’s market price. Microsoft had offered to boost its bid for Yahoo from $31 a share to $33 a share – adding that afore-mentioned extra $5 billion.

Unfortunately for Microsoft, even that higher price was nowhere near the $37-a-share offer that Yahoo co-founder and CEO Jerry Yang said it would take to get the deal done.

The details of the negotiations were contained in a letter that Ballmer sent to Yang; Microsoft released the letter to the media over the weekend. According to the letter, that extra $4 per share would have increased the cost of the deal by another $5 billion – bringing the total to nearly $55 billion.

Yahoo rejected Microsoft’s first $44.6 billion takeover offer Feb. 11, saying the bid substantially undervalued the company’s worth. The $31-per-share offer valued Yahoo at a 62% premium on Feb. 1, but Yahoo has traded as high as $31 a share as recently as November. Yang feels Yahoo is worth more than Microsoft is offering, even though the $33 per share offer is only about a dollar off of Yahoo’s 52-week high of $34.08.

Yahoo has consistently been losing market share to Google Inc.’s (GOOG) market dominance and tried to engage a number of other competitors such as Time Warner Inc. (TWX) and News Corp. (NWS) about possible partnerships, but with little success.

“This process has underscored our unique and valuable strategic position,” Yang said in the statement, MarketWatch reported. “With the distraction of Microsoft’s unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users.”

As late as Friday, Yahoo shares jumped 7% with a gain of $1.86 to close at $28.67 on reports of “intensifying” talks with Microsoft and an expected deal. But with the announcement on Saturday, some analysts feel the formal rescinding of the offer and the fact that Microsoft seems unwilling to resort to a proxy contest could put downward pressure on Yahoo shares, sending the stock back down towards its 52-week low of $18.58. If that happens, Yang and Yahoo’s board of directors could find themselves with a slew of lawsuits filed by angry Yahoo shareholders.