Yahoo!, whose shares fell 20 per cent on Monday after Microsoft dropped its $47.5 billion (£24 billion) bid for the company, is likely to face pressure and possibly a proxy battle from activist hedge funds looking to revive the deal.
With billions in financial muscle, some are laying the groundwork for a campaign after the three-month talks between Microsoft and Yahoo! collapsed at the weekend.
Microsoft walked, saying it would not bid more than $33 per share for Yahoo!, while Yahoo! wanted $4 a share more.
Yahoo! boss Jerry Yang gave hope a link might not be dead. He said he had "mixed feelings".
Asked if Yahoo! would still leave a door open for Microsoft to return, Mr Yang said: "If they have anything new to say, we would be open - I am more than willing to listen."
It had been Microsoft that ended the discussions.
"We were negotiating a way to find common ground and then on Saturday they chose to walk away," said the 39-year-old co-founder of the pioneering internet company. "They started it and they walked away."
Experts say it would likely take one or more substantial, seasoned activists to buy a large stake in Yahoo! and finance a credible multimillion-dollar proxy campaign. But at least one small firm, Ironfire Capital, is talking to other firms about running a director slate, according to Eric Jackson, who heads the firm.
"I'm mad," said Mr Jackson, who was involved in a successful campaign last year to have former Yahoo! chief executive Terry Semel replaced. "Yahoo!'s rejection was not in the best interests of shareholders, and the board needs to be held accountable."
His Florida-based firm has a minuscule holding in Yahoo!, just 96 shares. But if other, larger hedge funds line up and buy at least five per cent of the company's now-discounted stock and run a slate of director candidates that would favour a sale to Microsoft, the move could gain momentum.
Such a holding would cost more than $1.5 billion (£760 million). That leaves such a campaign likely only for the largest activists, such as Carl Icahn, William Ackman of Pershing Square Capital, Nelson Peltz's Trian Partners, Jana Partners and a handful of others.
"There are not a lot of activists who can invest $1 billion," said Manny Pearlman, chief executive of hedge fund Liberation Investment Group and veteran of numerous, smaller proxy battles.
Mr Icahn, who led a high-profile campaign against Time Warner two years ago and has invested over $1 billion in Motorola in a current proxy campaign, is not currently a Yahoo! investor and has no immediate plans to run a campaign, sources said.
But experts said the billionaire New York financier could be in a prime position to put pressure on Yahoo! to revive talks with Microsoft, since he was successful last year in negotiations to get
Oracle to return to the table to buy BEA Systems after the former walked away.
"There is a clear path to victory for someone willing to buy the stock and deliver the company to Microsoft at $33 a share," said a senior executive at one multi-billion dollar activist hedge fund. "You need a lead dog that runs the campaign, however."
Meanwhile, now that Microsoft has shelved its bid, it must convince investors it has a viable "Plan B" to fix an online business that has racked up nine straight quarters of losses.
That may be difficult for investors with long memories.
Six months ago, Microsoft chief executive Steve Ballmer told a who's who of Silicon Valley that the software company was prepared to take an "independent" path in its challenge to Google.
Mr Ballmer said at the Web 2.0 summit in San Francisco that while a combination with Yahoo might make sense in the future, Microsoft believed the independent steps it was taking - capital investment, research and development and smaller acquisitions - would, ultimately, lead to success.
When Microsoft then launched its attack on Yahoo! a few months later, and said it had been pursuing the company for more than a year, many wondered whether Microsoft ever believed its "go it alone" strategy. After now ending talks, that strategy's viability could be tested.
"It is imperative that in relatively short order Microsoft's management articulates a viable and credible new strategy for the online services business in the absence of Yahoo!," Bernstein Research analyst Charles Di Bona wrote in a note to clients.
"With the caveat that returning to the prior, pre-Yahoo! plan is likely to be neither credible nor well received."
Microsoft's online unit, which accounts for five per cent of revenue, is central to the company's future. It expects online advertising generated by the business to one day rival its bread-and-butter licensing revenue.
In the last few years, Microsoft has worked to build and refine a web search engine of its own, creating a new search advertising system called adCenter. More recently, it bought aQuantive, an online ad company, for $6 billion (£3 billion).
However, those steps have yet to deliver significant progress toward its goal, building an advertising powerhouse to rival Google.
So will it go on an internet shopping spree despite the Yahoo knock-back?
Time Warner's AOL unit could give Microsoft a stronger position in online display advertising, while social networking sites like Facebook and MySpace, owned by News Corp, may supply a large and loyal audience.
Since the start of 2006, Microsoft's web business has racked up losses totalling nearly $1.7 billion (£860 million).
"Microsoft has tried for a long time and it hasn't really got anywhere with its online initiatives," said Morningstar analyst Toan Tran. "If it's going to catch Google, it's got to get big, quick. Every day, Google gets stronger and stronger."