Yahoo's Yang needs a good plan to cover botched Microsoft deal

New York: Jerry Yang's got some explaining to do.

Today the Yahoo chief executive faces an angry chorus of shareholders asking why he failed to seal a $47.5 billion deal with Microsoft for the company he helped create.

To soften the blow, he will need to show how a last-minute $5 billion sweetener from Microsoft for its unsolicited bid was not enough to overcome the risks of a deal. Microsoft ended talks on Saturday after Yahoo dug in for a higher price.

Yahoo may also accelerate efforts to find a partner that will help stimulate growth, particularly an alliance with arch-rival Google.

"Yang had better be in a situation to shortly come forth with some sort of strategic alternative to explain why $31 a share wasn't enough," said David Garrity, analyst at Dinosaur Research. "There will be a certain percentage of the shareholder base itching to file lawsuits."

One argument the company already began to highlight in a public statement on Saturday night was that a significant number of its shareholders agreed that Microsoft should pay more than the $33 per share price it suggested in the last few days, up from an initial $31 per share. Some large Yahoo shareholders sought a price of $35 to $37 per share in a deal, a source said.

The company is also still pursuing discussions for alternatives to the Micro-soft offer, including a potential tie-up with Google for web search listings, the source said.

Neither of those moves will save Yahoo from shareholder lawsuits, but they could buy Yang some time until it becomes clear whether Microsoft CEO Steve Ballmer's decision to withdraw his offer is truly the end or a ploy.

But even on Saturday, some shareholders were showing their disbelief.

"Wow. I'm shocked Yahoo wasn't more reasonable. The stock will probably go down at least $5," said Walter Price, a senior portfolio manager at RCM.

Yang may not take the heat alone, given the amount of backing he received from Yahoo's board to press Microsoft for a higher price.

But that may mean they all get accused of bad judgment.