Jerry Yang, co-founder and chief executive of Yahoo!, last night hinted he would be prepared to re-open talks if Microsoft "had anything new to say".

At the weekend, Steve Ballmer, chief executive of Microsoft walked away from offering $47.5 billion for the online search engine, in a deal that valued Yahoo! at $33 a share. Mr Yang is understood to have refused to even consider yielding to the software giant for a valuation below $38 each.

After the talks broke down, shares in Yahoo! fell by as much as 20 per cent amid fears by traders that Mr Yang would not be able to either find another deal or increase its own stock price on his own.

The stock plunged even though it is understood that talks between Yahoo! and AOL, the internet arm of Time Warner, are continuing. Microsoft is also understood to be interested in buying AOL. It is thought that talks between Yahoo! and News Corporation, parent of The Times, are also still live.

Last night, Mr Yang said he had "mixed feelings" about events at the weekend, when the talks broke down. He added: "If they [Microsoft] have anything new to say, we would be open [...] I am more than willing to listen."

He explained: "We were negotiating a way to find common ground and then on Saturday they chose to walk away. They started it and they walked away."

Mr Yang is due to meet employees at the company's Californian headquarters today to reassure them about the future of Yahoo!.

Microsoft wanted to buy Yahoo! so that it could compete more effectively with Google, the biggest internet company in the world, for a slice of the $40 billion-a-year online advertising market.

Some analysts believe Yahoo!'s stock price will surrender most of its 50 per cent gain since Microsoft made its initial offer on January 31. The anticipated sell-off would leave Yahoo’s market value hovering around $30 billion.

Darren Chervitz, co-manager of the Jacob Internet Fund, a Yahoo! shareholder, said yesterday: “Clearly there’s frustration. 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.”

Eric Jackson, head of Ironfire Capital, a small hedge fund activist, said he was “mad” about Yahoo!’s rejection of Microsoft’s bid. He is urging shareholders to withhold their votes for the reelection of Yahoo!’s directors at its annual general meeting next month.

“Yahoo!’s rejection was not in the best interests of shareholders,” said Mr Jackson, who led a successful campaign to oust Terry Semel as Yahoo! chief executive last year.

Microsoft published a letter sent to Mr Yang at the weekend, detailing its decision to walk away. It also revealed that Mr Yang had threatened to out-source a lucrative part of Yahoo!’s business to Google, its larger rival, if Microsoft tried to make a formal hostile bid.

Such a move, Microsoft argued, would have damaged Yahoo!’s business.

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