SAN FRANCISCO - Just two weeks after breaking off merger talks, Microsoft Corp. and Yahoo Inc. have been pulled back to the bargaining table by their fears about what might happen if they don't work out a deal.

For now, Microsoft and Yahoo are dancing around the edges as they explore possible business arrangements without melding the two companies.

The notion of a half-baked deal did not excite investors yesterday as they reacted to Sunday's news that Microsoft and Yahoo are talking again.

Yahoo shares rose a scant 0.7 percent, or 2 cents, to close at $27.68 yesterday, while Microsoft shares fell 1.77 percent, or 53 cents, to close at $29.46.

But most analysts remain convinced the preliminary talks will culminate in Microsoft's buying Yahoo for between $33 and $37 a share, a price that translates into $47.5 billion to $53 billion.

Both Microsoft and Yahoo issued statements Sunday acknowledging they had not ruled out the possibility of a merger even though they are not discussing one now.

Although their discussions fell apart this month in a disagreement over price, both Yahoo and Microsoft have powerful incentives to reach a compromise within the next few weeks.

If Yahoo does not stop demanding $37 a share, its board could be overthrown in a shareholder mutiny led by activist investor Carl Icahn.

To pressure Yahoo into reviving the talks, he has nominated an alternative slate of 10 directors scheduled to run for election at Yahoo's July 3 annual meeting. Icahn did not respond to a request for comment yesterday.

Meanwhile, Microsoft's unwillingness to pay more than $33 a share created an opportunity for its nemesis, Google Inc., to enter an advertising partnership with Yahoo.

"It's becoming pretty clear that Yahoo is either going to work something out with Microsoft or do a deal with Google," said Standard & Poor's equity analyst Scott Kessler. "If Yahoo winds up with Google after all this, it would be pretty damaging to Microsoft."

Microsoft began pursuing a Yahoo takeover in late January largely to counter Google's dominance of the Internet search and advertising markets.

After Microsoft pounced, Yahoo became more receptive to an idea that it had resisted in the past - allowing Google to show some of the ads alongside Yahoo's search results.

A two-week trial last month demonstrated Google's technology could help boost Yahoo's profit, and the two sides began exploring a long-term alliance. But any partnership between Google and Yahoo likely would face antitrust obstacles because the two companies control more than 80 percent of the U.S. search advertising market.

A similar deal between Yahoo and Microsoft would not pose the same antitrust problems because Google still would control more than half the market.