Yahoo's Chief Executive Officer Jerry Yang defended his handling of failed takeover negotiations with Microsoft and said he remains open to an offer from the US software giant, in an interview published on Tuesday in the Financial Times.

Yang told the paper he was willing to negotiate but Microsoft pulled its bid for Yahoo after talk turned to raising it above $33 per share.

Microsoft CEO Steve Ballmer said Yang refused to accept less than $37 per share, a $5-billion bump in purchase price.

"We did not say it was a take-it-or-leave-it number in the sense that we would never negotiate any more," Yang told the Financial Times.

"We were totally willing to do a transaction, and they walked away."

Yahoo stockholders will be furious and litigious, putting tremendous pressure on the firm to quickly come up with an impressive business plan or go crawling back to Microsoft, analysts believe.

Yahoo shareholders are expected to take Yahoo executives to task during an annual meeting on 3 July.

The ten members of Yahoo's board of directors are up for re-election and ousting the panel is one way shareholders can express furore about not accepting a Microsoft offer that totalled nearly $50-billion.

When asked what he would do if Microsoft showed renewed interest in taking over Yahoo, Yang said, "We're always open to all alternatives."

"We've put out a way of having them buy Yahoo, give them a path to do that," he continued. "If that's what they want to do, we would be open to a conversation."

Microsoft was eager to combine internet resources with Yahoo to better battle Google, which dominates an online search and advertising market expected to double to $80-billion by 2011.

Yahoo's shares take a dive

Yahoo's shares plummeted sharply on Monday as the internet giant's future became clouded after Microsoft walked away from a bid rather than pursue a hostile takeover.

Shares in the internet pioneer sank 15 percent by the close of trading but remained $5 above the price the stock was at when Microsoft's made its 1 February offer, signalling many in the market believe the deal is not dead.

"I don't think it's over," IDC analyst Karsten Weide said of Microsoft's quest to acquire Yahoo.

"I think what really happened is Microsoft called Yahoo's bluff. For now, they are singing the tune 'Tiiiime is on my side.'"

"The question for Yahoo is how long can they hold out," Weide said.

The fact that Microsoft's stock price ended on Monday trading down slightly to $29.08 hints that the market thinks the world's leading software maker needs a Yahoo tie-up to battle internet advertising colossus Google.

Google's stock price climbed more than two percent in a sign investors feel the Microsoft setback is good for the Mountain View, California, company.

'Far from over'

Some analysts said Yahoo may need another merger partner to face up to Google.

"Of course, this is far from over," said Danny Sullivan at Search Engine Land. "There's going to be a distraction at the very least caused by some shareholders themselves that are expected to be unhappy and who may wish to force a change."

Sullivan said Microsoft may have shot itself in the foot by refusing to come up with the extra cash needed to seal the deal.

"If Microsoft's walkaway from the Yahoo deal is indeed a ploy to save $5-billion, Microsoft CEO Steve Ballmer may have proven himself pennywise and pound foolish," Sullivan said.

"He was prepared to spend billions to finally make Microsoft a serious rival to Google. For a bit more, he may have destroyed Microsoft's chance to get there."

Others said Microsoft did the smart thing by rejecting the deal and should use the money earmarked for a Yahoo purchase to instead invest in a host of smaller promising internet firms.

"We applaud Microsoft's decision," said Robert Breza, analyst at RBC Capital Markets. "We would expect Microsoft will look to other internet and media properties."

Citigroup Analyst Brent Thill said that due to the lack of alternatives to Yahoo in the marketplace, there is a chance that both Microsoft and Yahoo can "reconcile their differences" and join forces.

Bernstein Research's Charles Di Bona said Microsoft is facing uncertainty as well about its future.

"We believe it is imperative that in relatively short order, Microsoft's management articulates a viable and credible new strategy for (its online services business) in the absence of Yahoo," Di Bona said in a research note.

AFP