And so the aftermath begins: Yahoo's shares are down 16 percent in early trading today, to about $24, following Microsoft's decision to withdraw its bid to acquire the company. (Microsoft ultimately offered $33 a share; Yahoo's board wanted $37.) Microsoft shares are up 2 percent, to about $29.85.

So what did the saga of the past three months do for Microsoft and Yahoo in the eyes of the stock market? While broader market trends also come into play, it's worth looking back to where each company stood just prior to Microsoft's Feb. 1 announcement of its unsolicited offer. Microsoft was trading up around $32.60 on Jan. 31. Yahoo was down around $19.18.

The big question now is what each company will do next, and how each business will fare on its own. See this story from today's paper for an assessment of Microsoft's potential moves. And here's the San Francisco Chronicle's take on Yahoo's post-Microsoft prospects.

Analysts are dissecting the news in notes to clients this morning. Highlights:

Sid Parakh, McAdams Wright Ragen:

While "questions on how Microsoft will grow its Online business will now return, Microsoft may be able to justify added investments in the Online business without much opposition from shareholders after having stopped short of investing ~$50 billion for Yahoo!. Investments will be across multiple fronts – product development, marketing, etc. Microsoft has continually indicated its willingness to make significant investments in this business."

Brent Thill, Citigroup:

The Good -- MSFT investors will breathe a sigh of relief in the near-term for three reasons; 1) integration would have been a considerable distraction, 2) MSFT showed price discipline by holding firm at $33 which sets a strong precedent for future M&A, and 3) the deal would have likely been dilutive near term and MSFT can now use part of the $48bn for other acqs./buybacks.

The Bad -- Full Circle Back to #3 Player - MSFT's Internet strategy is hampered by its #3 status in search (which reflects its lack of brand equity) and limited ad inventory. While some have questioned whether MSFT should even be in the Internet business given it is out of its core competency, we believe it is essential that MSFT fixes its Online strategy as the future is shifting towards cloud computing.

Jeffrey Lindsay and Charles Di Bona, Sanford C. Bernstein & Co.:

While we expect some recovery in MSFT's stock, a full recovery seems unlikely until MSFT articulates a substantive, credible and new online strategy. We believe simply returning to the original, pre-YHOO strategy is likely insufficiently credible.

After an initial drop, the direction of YHOO's share price depends on how quickly the company indicates deals with GOOG and/or AOL. If there is a deal, YHOO's stock could recover; without one, investor confidence will likely continue to suffer.