Yahoo shares fall 17 pct after Microsoft withdraws $44B bid

Analysts believe Yahoo Inc.'s stock price will surrender most, perhaps all, of its 50 percent gain since Microsoft Corp. made its initial offer on Jan. 31 in an effort to challenge online advertising and search leader Google Inc. The anticipated sell-off would leave Yahoo's market value hovering around $30 billion.

Last-ditch talks between Yahoo and Microsoft were fruitless, leading Microsoft to walk away from a deal Saturday.

In early Monday trading, Yahoo shares fell 17.2 percent to $23.73, below Friday's close of $28.67, when investors were still hopeful about a deal.

Microsoft shares rose 2.3 percent, or 66 cents, to $29.30. The shares had declined 10 percent to $29.24 since the bid, reflecting concerns that the proposed marriage would turn into a complicated mess that would enable Google to grow even stronger.

Shares in Google went up 2.3 percent, or $13.06, to $594.35. The company not only averted a marriage it had fiercely objected but also began discussions that could lead to a long-term advertising partnership with Yahoo, a deal made more likely with Microsoft's withdrawal. Any Google-Yahoo alliance, though, would likely face antitrust hurdles.

Yang remained convinced that Yahoo, a company he started in a Silicon Valley trailer 14 years ago, was worth more than the money Microsoft Corp. had offered for the Internet pioneer.

Now he may only have a few months to convince Wall Street that his rebuff of Microsoft's takeover bid was a smart move and if he can't, analysts won't be surprised if Yang is either replaced as CEO or forced to consider accepting a lower offer if Microsoft comes knocking at his door again.

"This squarely puts the pressure on Jerry Yang to deliver results and shareholder value," Standard & Poor's equity analyst Scott Kessler said. "You are going to see a lot of shareholders just throwing in the towel because they are going to realize it's going to take awhile for the stock to get back to where it was Friday."

Yahoo shares finished last week at $28.67, slightly less than the $29.40 per share that Microsoft was offering before Chief Executive Steve Ballmer agreed to raise the offer to $33 per share in a last-ditch effort to get a deal done.