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Yang, who will return to his former, strategic role of "Chief Yahoo", has paid the price for his stubborn refusal to entertain a deal with Microsoft until the last minute. "From founding this company to guiding its growth into a trusted global brand that is indispensable to millions of people, I have always sought to do what is best for our franchise," Yang claims in a statement.

The Yahoo boss's position was untenable after he persistently refused to engage in takeover talks with Microsoft, and instead sought a search deal with rival Google.

However, Google pulled the plug on the deal after the US Department of Justice revealed it planned to file a lawsuit to block the agreement on competition grounds.

Yang made one final, desperate plea to Microsoft CEO Steve Ballmer to buy the company, having

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long argued that falling into Microsoft's arms wouldn't be in Yahoo's best interests. "To this day, I have to say that the best thing for Microsoft to do is to buy Yahoo," Yang said. "I don't think that is a bad idea at all...at the right price, whatever the price is, we are willing to sell the company."

That plea was rebuffed by Ballmer, who said he was "not interested" in making another offer for the search company, having seen a bid of $33 per share turned down in the summer. The company's share price stands at just under $11 today.

Microsoft to make a move?

Yang's resignation will increase the likelihood that Microsoft will return to the negotiating table with a new bid - although presumably at a much lower price than was offered in the summer.

Microsoft executives were reportedly exasperated by Yang's attitude to takeover talks, but with allies such as rogue investor, Carl Icahn, now holding a seat on the Yahoo board, any move from the software giant is likely to receive a warm welcome.

Analysts predict that a new deal could be concluded quickly. "The company [Yahoo] is in desperate need of change and this is clearly one way to do it," Ross Sandler, an analyst at RBC Capital Markets, told Reuters. "Jerry was the roadblock for the last deal getting done."

Yahoo president Sue Decker is among the favourites to become the new CEO.