Google's Yahoo Rebound Play

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Microsoft said in a statement that it remains open to a more limited deal, such as an acquisition of Yahoo's search business. But a person close to the matter says Yahoo's board spurned a Microsoft offer for those operations because the board believed Yahoo needed to keep the capability in house. Microsoft was not interested in a more limited deal, this person said.

Another person who asked not to be identified said Microsoft was unwilling to make another offer for all of Yahoo, at least not at the $33-a-share price that Yahoo's board members felt was the least they could accept. By the end of April, this person said, Microsoft became less enamored of a merger because it became apparent the deal would have to be reviewed twice—once by the current administration's regulators and then again next year under a possible Democratic administration, which may be less accepting of large mergers.

Execs on the Way Out

Schmidt said the Yahoo deal came together after months of on-and-off discussions, including between him and Yahoo's Yang. The agreement culminated after an all-night session wrapping up the deal. Schmidt also said Google would like to do more business with Yahoo over time.

Investors may pressure Yahoo further if they don't think the Google plan will improve Yahoo's prospects enough to justify a higher stock price. It's unclear what leverage they will have besides selling more shares. Meanwhile, not all of Yang's Yahoos are sticking around to see what happens next.

Two senior executives, at least, are on the way out, according to various news reports: Jeff Weiner, executive vice-president of Yahoo's network division, which includes much of Yahoo's major operations, including key homepages and search; and Usama Fayyad, chief data officer and executive vice-president of research and strategic data solutions. A prominent Yahoo software developer, Jeremy Zawodny, said on June 12 that he, too, is leaving to join a company he didn't identify. They follow a steady stream of departures over the past year or more.

If Yahoo's prospects don't improve and the stock continues to fall, Yang and his board may find themselves once again under pressure to take further steps—even if it's unclear what those steps might be.

Hof is BusinessWeek's Silicon Valley bureau chief .