Yahoo's Yang needs a good plan, fast

By Michele Gershberg - Analysis

NEW YORK (Reuters) - Jerry Yang's got some explaining to do.

Come Monday, the Yahoo chief executive will face an angry chorus of shareholders asking why he failed to seal a $47.5 billion deal with Microsoft Corp 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 Inc.

"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 on Monday morning."

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 familiar with the matter said.

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