San Francisco  - Yahoo shares plummeted by over 16 per cent in early trading Monday on the AMEX stock exchange as investors devalued the company following Microsoft's withdrawal of its 44.6 billion dollar takeover bid for the web portal.

Microsoft backed out after bidding 33 dollars per share for the internet pioneer, which it saw as a key plank in its strategy for meeting Google's domination of web-based software. But in a key showdown on Saturday in Seattle with Microsoft CEO Steve Ballmer, Yahoo founder and CEO Jerry Yang said the board would only accept a price of
37 dollars per share.

Yahoo had been trading at close to 29 dollars a share on Friday but dropped as low as 22.97 dollars Monday before recovering somewhat to 24.04 dollars. Microsoft investors cheered the deal's abandonment, sending the software giant's share prices up 2.22 per cent to 29.90 dollars in early Nasdaq trading.

The withdrawal of the deal presents challenges for both companies, with many analysts still feeling that it could come to fruition later this summer at an adjusted price.

Yang, 39, has been the main opponent to the Microsoft offer, arguing that the company is in the early stages of a turnaround that will boost profits by 25 per cent next year. The company has also announced a potentially lucrative advertising link with Google and a social networking strategy that aims to leverage the power of Yahoo's 500 million global users. Yahoo is also reportedly considering a merger with AOL.

"With Microsoft's withdrawal, we'll be better able to focus our energy on growing our industry leadership and maximizing value for stockholders," Yang, said in a blog post. "We'll continue to execute on our plan." (dpa)