The news that Redmond, Wash.-based Microsoft had withdrawn its offer to buy Yahoo brought a swift and harsh response from investors, who drove Yahoo's price down 15 percent yesterday.

Microsoft walked away Saturday from its unsolicited offer to buy Yahoo at $33 a share after Yahoo's board insisted on a share price of $37.

But members of Pittsburgh's tech and investment communities said that while the Microsoft-Yahoo saga has closed a chapter, it may not have reached its end. Microsoft could knock on Yahoo's door again, especially if the company does not reverse its fortunes by the end of the year. Indeed, it could return with a lower offer, which Yahoo might then accept.

"We've seen that before in the software industry," said Raul Valdez-Perez, chief executive officer of Vivisimo, a Squirrel-Hill based Internet search company. "I don't know if that's their tactic, but things could turn out that way."

"It's going to be a bitter pill for Yahoo shareholders to swallow" if that happens, said strategic management consultant Frank Stasa.

But the very possibility of an eventual sale to Microsoft may have helped to keep Yahoo's shares from dropping to their pre-bid price of $19.18; they closed at $24.37. Micrsoft's shares dropped one-half of one percent, to $29.08.

"I feel that Yahoo was crazy" for not taking Microsoft's offer, Mr. Stasa said. "Google is the big winner here."

Google not only averted a marriage it had fiercely opposed but also began discussions that could lead to a long-term advertising partnership with Yahoo, a deal made more likely with Microsoft's withdrawal. Any Google-Yahoo alliance, though, would likely face antitrust hurdles.

Still, the collapse of the deal means that Google will continue its reign as the monarch of online search, commanding a 60 percent market share. The search giant's shares closed yesterday at $594.90, up 2.34 percent.

"The big picture," Mr. Valdez-Perez said, is that "Microsoft has to make moves in the space where Google is strong...because they're being attacked where they're strong."

That attack has come in the form of Google Apps, software that enables users to use the internet for functions that were once reserved for the desktop. Introduced in August 2006, Google Apps allows the online creation of word processing documents and spreadsheets, and the maintaining of corporate calendars, making it a potential challenger to Microsoft cash cow Office suite.

For Microsoft, "the threat of that as a substitute for what we've all been used to is absolutely real," Mr. Stasa said.

Yahoo Chief Executive Officer Jerry Yang remained convinced that the company he started in a Silicon Valley trailer 14 years ago, was worth more than the money Microsoft had offered.

Now he may only have a few months to convince Wall Street that his rebuff of Microsoft's takeover bid was a smart move -- and if he can't, analysts won't be surprised if Mr. Yang is either replaced as CEO or forced to consider accepting a lower offer if Microsoft comes knocking at his door again.

"This squarely puts the pressure on Jerry Yang to deliver results and shareholder value," Standard & Poor's equity analyst Scott Kessler said. "You are going to see a lot of shareholders just throwing in the towel because they are going to realize it's going to take a while for the stock to get back to where it was Friday."

In a posting Sunday night on Yahoo's blog, Mr. Yang welcomed the added pressure. "We know the spotlight will probably stay on us for a while," Yang wrote. "That's fine -- we have a clear path ahead and momentum to build on." He added the Microsoft saga had turned Yahoo into "a stronger, more focused company with an even greater sense of purpose."

Yahoo shares finished last week at $28.67, slightly less than the $29.40 per share that Microsoft was offering before Chief Executive Officer Steve Ballmer agreed to raise the offer to $33 per share in a last-ditch effort to get a deal done.

Disillusioned shareholders are bound to question whether the rejection of Microsoft's sweetened offer was driven more by emotion and ego than by sound business sense.

"Clearly there's frustration," said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns Yahoo stock. "I am not even sure if Yahoo cares about its shareholders because they didn't show much regard for shareholders' best interests in this process."

In his blog posting, Yang defended the board's handling of the Microsoft bid and branded some of the criticism as "a lot of nonsense and misinformation."

"We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo and was in the best interests of our stockholders," Mr. Yang wrote.

Accompanied by fellow Yahoo co-founder David Filo, Mr. Yang flew to Seattle on Saturday to inform Mr. Ballmer that the company wouldn't sell for less than $37 per share -- a price that Yahoo's stock hasn't reached since January 2006.

To win the faith of shareholders, Mr. Yang will have to execute a turnaround plan that he began drawing up nearly a year ago after he replaced Terry Semel as CEO amid shareholder angst about the company's financial malaise.

Mr. Ballmer also will be under the gun to prove he can come up with another way to challenge Google's dominance of the Internet's lucrative search and advertising markets.

The unsolicited bid was widely seen as Mr. Ballmer's admission that Microsoft needed Yahoo's help to upgrade its unprofitable Internet division.

Analysts now expect Mr. Ballmer to use the money he had earmarked for the Yahoo acquisition to explore other possible deals with large Internet companies such as Time Warner Inc.'s AOL and News Corp.'s MySpace and promising startups such as Facebook Inc. and LinkedIn Corp. Microsoft already owns a 1.6 percent in Facebook, the second-largest social network behind MySpace.

With $25 billion in cash and short-term investments, "they have the money to buy anything they want," said John Manzetti, president and chief executive officer of the Pittsburgh Life Sciences Greenhouse. "There's probably nothing that's not possible for them."