UPDATE 2-Investors eye Yahoo's alternatives to Microsoft

(Adds Yang e-mail)

By Michele Gershberg and Anupreeta Das

NEW YORK/SAN FRANCISCO, May 4 (Reuters) - Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz) faced growing pressure on Sunday to find an alternative strategy to Microsoft Corp's (MSFT.O: Quote, Profile, Research, Stock Buzz) $47.5 billion takeover offer after the software maker walked away over a disagreement on price.

Yahoo shares could fall by more than 30 percent on Monday over the breakdown of talks, but that drop could be softened if Wall Street believes Yahoo Chief Executive Jerry Yang has another strategy up his sleeve, analysts said.

Yahoo is likely to push for an advertising partnership with Web search leader Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz), sources familiar with the matter said. A tie-up with Google, seen as a big winner from the end of Microsoft-Yahoo talks, should help boost Yahoo's operating performance in the near term.

"It's time to get a move on with Google," said Jeffrey Lindsay, analyst with Sanford C. Bernstein. "Let's hope they weren't bluffing."

Yahoo is also still considering a deal with another Internet media and advertising major, such as Time Warner Inc's (TWX.N: Quote, Profile, Research, Stock Buzz) AOL, people familiar with the discussions said.

But Yang and the company he helped create could face a flood of shareholder lawsuits or other actions if nothing materializes.

"There are two things that could support the stock: the potential for Microsoft to return and the potential to do a Google deal," said Clayton Moran, analyst at Stanford Group.