Analysts believe Yahoo's next CEO must be willing to merge the search firm with Microsoft.
That's because this remains Yahoo's best option, short of a dramatic turnaround plan, analysts said.
But if Microsoft does eventually buy Yahoo, shareholders should brace themselves for a price far lower than the $47.5 billion the software behemoth offered earlier this year.
Wall Street analysts estimate that Microsoft would not offer more than $17-$20 per share for Yahoo, whose stock has fallen below $12 from a high of $30.25 in February.
Online display advertising, a core Yahoo business, has also shrunk as corporate advertisers scale back on Web marketing promotions amid a global economic slump.
Under Chief Executive Jerry Yang, who on Monday agreed to step down from his role once the board finds a replacement, Yahoo searched for alternatives to being bought, exploring partnerships with Google and Time Warner's AOL unit.
But Google, which struck a search advertising deal with Yahoo in June only to abandon it as regulatory concerns grew, is unlikely to come back for more.
Meanwhile, Yahoo's months-long discussions with Time Warner about combining its AOL unit, have not led to a deal so far.
And Microsoft, for all its proclamations to the contrary, still needs Yahoo's assets to bolster its presence in online search and advertising, analysts said.
But the scales will be tipped in Microsoft's favor if and when the new Yahoo CEO does reach out to negotiate a new deal.
"It's not going to be Microsoft calling Yahoo saying, 'We're making a bid for $17 a share'," Needham & Co. analyst Mark May said.
"Microsoft is done negotiating with Yahoo. If Yahoo wants to do a deal, its board needs to have full agreement" on the price they want to sell the company for, May added.
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