Merger fizzle saps Yahoo's value

Yahoo shares fell 15 percent Monday as hopes for the once-dominant Internet icon dimmed after Microsoft's withdrawal of a $47.5 billion takeover bid.

The sell-off wiped out nearly half the gain in Yahoo Inc.'s stock price since Microsoft Corp. made its initial offer Jan. 31 in an effort to challenge online advertising and search leader Google Inc. The downturn left Yahoo's market value about $14 billion below Microsoft's last offer.

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

Yahoo shares shed $4.30 on Monday to close at $24.37, below Friday's close of $28.67, when investors were still hopeful about a deal.

Despite the backlash, analysts doubt Yahoo shares will 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.

Google shares rose $13.61, or 2.3 percent, to close at $594.90. The company not only averted a marriage it had fiercely objected to 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 probably face antitrust hurdles.

Meanwhile, shares in Microsoft fell 16 cents, or 0.6 percent, to close at $29.08. 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.

Yahoo Chief Executive Jerry Yang remained convinced that the company he started in a Silicon Valley trailer 14 years ago, was worth more than the money Microsoft had offered.

Now he might have only a few months to convince Wall Street that his rebuff of Microsoft's takeover bid was a smart move.

"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."

In a posting Sunday night on Yahoo's blog, Yang welcomed the added pressure. "We know the spotlight will probably stay on us for a while," Yang wrote. "That's fine. We have a clear path ahead and momentum to build on."