CORRECTED-UPDATE 4-Yahoo's Yang to step down; search on for CEO

(Corrects 16th paragraph to change analyst affiliation, 21st paragraph to show Dan Rosensweig is former Yahoo COO)

(Adds additional background as paragraph 6)

By Anupreeta Das and Yinka Adegoke

SAN FRANCISCO/NEW YORK, Nov 17 (Reuters) - Yahoo Inc (YHOO.O) said Jerry Yang will step down as chief executive as soon as the board finds a replacement, sending shares up 4 percent on hopes the departure would clear the way for a deal with Microsoft.

Yang -- who will return to his former role as Chief Yahoo, focusing on strategy and technology -- tried to carve an independent strategy for Yahoo and was blamed when Microsoft Corp (MSFT.O) walked away from an offer to buy Yahoo earlier this year.

Rival Google Inc (GOOG.O) abandoned a search advertising partnership amid regulatory concerns, and Yang faced a growing chorus of criticism from investors and analysts as Yahoo's shares nosedived.

Yahoo's months-long discussions with Time Warner Inc (TWX.N) about combining with its AOL unit -- as yet another way to boost Yahoo's earnings -- have also failed to produce a deal.

"The company is in desperate need of change and this is clearly one way to do it," said Ross Sandler, an analyst at RBC Capital Markets, adding that Microsoft could enter the picture again. "Jerry was the roadblock for the last deal getting done," he said.

Yang has consistently said that he would sell the company for the right price.

Microsoft declined to comment.

Yahoo shares rose to $11.10 in after-hours trading from their Nasdaq close of $10.63.

The shares are down nearly 65 percent from their 52-week high of $30.25, reached in February, two weeks after Microsoft made its $31-a-share offer public.

Microsoft withdrew its $47.5 billion buyout offer in May after Yahoo rejected the sweetened bid.

Yang, a co-founder of Yahoo, took on the CEO role in June 2007, hoping to strengthen its position as an online consumer brand.

"From founding this company to guiding its growth into a trusted global brand that is indispensable to millions of people, I have always sought to do what is best for our franchise," Yang said in a statement.

In an e-mail sent to employees, a copy of which was obtained by Reuters, Yang said his decision to step down was taken jointly with Yahoo's board.