As Yahoo's fortunes and stock price continue to drop, CEO Jerry Yang has become much more open to another offer from Microsoft. "We were ready to negotiate," Yang said of the Microsoft deal earlier this year. There's the problem right there; Microsoft was overpaying and Yahoo should have known it.On Jan. 31 this year, Yahoo stock closed at $19.18 per share. The next day, Microsoft made an offer of $31 a share. That was later raised to $33 and was rumored to have edged as high as $35 before Ballmer realized Yang wasn't being realistic and called it quits. Investors realized Microsoft had truly lost its passion for a Yahoo deal. Yahoo didn't take my advice earlier this year and close the deal before Ballmer came to his senses. Now, the foreseeable recession has hit and that $33 offer is about as likely as getting a new sub-prime mortgage.

The news from the economy has been relentlessly bad, and isn't likely to get better anytime soon. As the distant No. 2 behind Google, Yahoo doesn't have a strong position to weather this downturn. Let's say that without the hope of a buyout, investors value Yahoo stock at about $12 a share. Sure, the stock perked up a bit in the past week, but that's only because Jerry Yang was singing "Baby Come Back" with a mariachi band outside Steve Ballmer's window. When Ballmer dashed those hopes today, the stock dropped back again.

Still, I wonder if this is just another negotiating tactic on Ballmer's part; he certainly holds all the cards in this game. If Microsoft applied the same price premium multiple they used in February to the current $12 price, Yahoo would be looking at an offer around $21 a share. Are Yahoo shareholders that desperate? Given the leadership and vision that Yahoo execs have shown in the past year, I think they should be. Jerry Yang should realize that the price of Yahoo has fallen and it can't get up.