Pressure's on for Yahoo's CEO Yang

Yahoo Inc. Chief Executive Jerry Yang has gotten what he wanted: a chance to prove his company is worth more than the $47.5 billion that Microsoft Corp. had offered to buy the Internet pioneer.

Faced with resistance from Yang and the rest of Yahoo's board, Microsoft withdrew its offer over the weekend.

Yang is facing a daunting challenge, as he will be pointedly reminded Monday, when investors are expected to show how little they think of Yahoo without a takeover bid on the table.

Yahoo's stock price had climbed nearly 50 percent since Microsoft's initial offer. Many analysts think the California-based company will surrender most or all of that gain, leaving its market value about $30 billion.

Disillusioned shareholders are bound to question whether the rejection of Microsoft's sweetened $33-per-share offer was driven more by emotion and ego than by sound business sense.

"Clearly there's frustration," said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns Yahoo stock. "I am not even sure if Yahoo cares about its shareholders, because they didn't show much regard for shareholders' best interests in this process."

Despite such negative sentiment, Yahoo shares are unlikely to immediately fall back to their $19.18 pre-bid price -- partly because some investors might still be holding out hope that the software maker will renew its takeover attempt if Yahoo continues to struggle.

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

Accompanied by fellow Yahoo co-founder David Filo, Yang flew to Seattle on Saturday to inform Ballmer that the company wouldn't sell for less than $37 per share -- a price that Yahoo's stock hasn't reached since January 2006.

Analysts and investors were left to wonder why the two sides couldn't compromise at $35 per share.

"They really didn't seem that far apart," Chervitz said. "There is probably blame to go around on both sides, but I think most of it is in Yang's hands."

Monday's anticipated shareholder backlash will put Yang on the hot seat as he tries to execute on a turnaround plan that he began drawing up nearly a year ago after he replaced Terry Semel as chief executive officer amid shareholder angst about the company's financial malaise.

"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."

Ballmer also will be under the gun to prove he can come up with another way to challenge Google Inc.'s dominance of the Internet's lucrative search and advertising markets.

The unsolicited bid was widely seen as Ballmer's admission that Microsoft needed Yahoo's help to upgrade its unprofitable Internet division.

Analysts now expect Ballmer to use the money he had earmarked for the Yahoo acquisition to explore other possible deals with large Internet companies, such as Time Warner Inc.'s AOL and News Corp.'s MySpace or promising startups such as Facebook Inc. and LinkedIn Corp. Microsoft already owns a 1.6 percent in Facebook, the second-largest social network behind MySpace.

But Ballmer is unlikely to be under as much duress as Yang, because most analysts think Microsoft's stock price will rise Monday. The shares had declined 10 percent to $29.24 since Ballmer made the bid, reflecting concerns that the proposed marriage would turn into a complicated mess that would enable Google to grow even stronger.