Yahoo's efforts to revive takeover talks with Microsoft have reached a dead end, setting the stage for the internet pioneer to turn over a piece of its advertising platform to online search leader Google, an Associated Press report said.
The news caused Yahoo shares to plunge 10% as investors abandoned hope that Microsoft would renew a nearly five-month quest to buy the Sunnyvale-based company, the report also said.
While a stock sell-off is never welcome news for any company, Wall Street's disenchantment comes at a particularly bad time for Yahoo and its board of directors.
Yahoo is trying to fend off a shareholder mutiny led by activist investor Carl Icahn, who has vowed to replace the company's board because of the way the directors handled the Microsoft negotiations.
But Icahn has been hoping to engineer a sale to Microsoft, so some shareholders may be reluctant to support his attempted coup unless he can demonstrate his slate of directors has a better turnaround plan than the current board.
Icahn did not return phone calls seeking comment Thursday.
The fate of Yahoo's board is scheduled to be determined at the company's August 1 annual meeting.
Yahoo tried to persuade Microsoft to revive its last takeover offer of €30.7 billion (US$47.5 billion), or €21.3 (US$33) per share, but the software maker wasn't willing to bid that much again, according to statements from the two companies.
Microsoft CEO Steve Ballmer had withdrawn an oral offer of $33 per share after Yahoo CEO Jerry Yang asked for $37 per share in a May 3 meeting at a Seattle airport.