With Jerry Yang quitting as Yahoo Inc.'s chief executive, the Internet company's board will confront pivotal questions as it looks for a new leader.

Should Yahoo swallow its pride and try to strike a buyout deal with Microsoft Corp. at a price far below Microsoft's $47.5 billion offer from 6 1/2 months ago? Or should Yahoo still pursue a long-awaited turnaround that's becoming more difficult to achieve as the economy tanks?

If Yahoo plays it safe and hires someone from within or someone friendly with Microsoft, it could signal the board merely wants an interim captain who can steer the ship until Microsoft, or possibly another buyer, comes to the rescue.

But should Yahoo recruit a CEO with a prestigious resume or pluck an up-and-coming technology star, it will be seen as a sign that the company is digging in to remain independent for the long haul.

"It's time for Yahoo to decide if they are going to keep entertaining offers or really start to focus on a business strategy," said Mike Leo, a veteran online ad executive who now runs Operative Inc. "Yahoo still has some great assets. They have just been mismanaged."

Most analysts and investors have interpreted Yang's departure as precursor to Microsoft's acquisition of Yahoo in its entirety or at least its search engine, which ranks a distant second in usage behind Google Inc.'s.

Yahoo shares gained 92 cents, or more than 8 per cent, to close Tuesday at $11.55. That's a fraction of the $33 per share that Microsoft offered in early May before Yang's request for more money prompted the Redmond, Wash.-based software maker to withdraw its bid.

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