Jerry Yang's announcement that he will step down as CEO of Yahoo Inc has set the stage for the internet company to revive acquisition talks with Microsoft Corporation.

Yang had come in for a lot of criticism for failing to strike a deal with Microsoft earlier this year, which finally led to the developments. Yang's exit could finally see the deal come up for re-negotiation. It could clear the way for Microsoft CEO Steve Ballmer, who reportedly would not be keen calling again, and Yahoo board to take up the deal for a fresh negotiation.

But, this time around, Yahoo shareholders will have to be prepared for a price much lower than what Microsoft had offered in July this year. According to industry insiders, Microsoft would offer no more than $15 a share, or $ 21. 6 billion, in a renewed bid in view of the sharp drop in Yahoo's fortunes and the current economic climate. This would still amount to a 50 per cent premium on Yahoo's current $10.63 share price though only half of the original $31 a share, or $ 44.6 billion bid in February.
 
According to a company statement, chairman Roy Bostock would initiate the process to appoint a successor to Yang; reports say Heidrick & Struggles, a leading international executive search firm, has been retained for this.

Microsoft, however, does not seem to be eager to play ball; it is no longer interested in buying all of Yahoo. According to Steve Ballmer, Microsoft is only interested in some sort of web search deal with Yahoo. Yahoo had earlier rejected both takeover and search engine bids from Microsoft. Analysts say that Yahoo  needs either a substantial  turnaround plan with a comprehensive cost cutting exercise, or an acquisition by Microsoft to satisfy investors.

Analysts believe that Microsoft is playing a waiting game and will be only too happy to restart the conversation, though on its own terms, at a later date. The presence of activist investor Carl Icahn on Yahoo's board, who has openly suggested a Yahoo-Microsoft deal, may be instrumental in bringing Microsoft to the table. Analysts believe that Microsoft would eventually come back because both Yahoo and Microsoft need each other. Microsoft, they say, would be interested in Yahoo's  search audience, the traffic and the clicks as it is important for Microsoft to have a big presence in search and display.