Microsoft (MSFT) is going it own way as weekend negotiations with Yahoo (YHOO) fell apart Saturday.

But just what path the software giant takes from here, remains the question.

After three months unremitting effort, Microsoft, led in negotiations by CEO Steve Ballmer, came within a few billion dollars of sealing the transformative deal that would have given the Redmond, Wash. tech giant an online advertising operation second in size to archrival Google (GOOG).

Yahoo co-founder and CEO Jerry Yang was reportedly looking for a purchase price north of $37 a share and Ballmer, having raised the original $31 a share bid to $33, walked away rather than raising the bid.

The $46 billion acquisition of Yahoo was seen by Microsoft and industry analysts as the company’s best strategy to address the shortcomings of its overall Internet business. But in the end, Ballmer said: “The economics demanded by Yahoo do not make sense for us.”

So what makes sense now? A lot will be made of Yahoo’s 20% stock plunge in the wake of the failed deal, but Microsoft shares haven’t exactly soared now that the overhanging pressure of a costly takeover plan has vanished. Microsoft was up 2% in premarket trading Monday, not exactly a vote of confidence for the company’s prospects. Investors may have taken some comfort in Ballmer’s ability to walkaway from a pricey move, but the solace is temporary. Microsoft still has faces an unrelenting Google on nearly all business fronts.

Pursuing a hostile takeover through a proxy battle wasn’t in the cards for Microsoft, as Fortune’s Adam Lashinsky pointed out Friday. Given the big holdings of Yahoo insiders and the typically non-voting retail shareholders, the math for a majority vote didn’t work in Microsoft’s favor.

Analysts are quick to point to a similar deal earlier this year between enterprise software shop Oracle (ORCL) and rival BEA. After BEA rejected a $17 a share or $6.7 billion unsolicited offer in October, Oracle walked away. Then in January Oracle came back with a winnnig bid of $19.37 or $8.5 billion.

If Yahoo is Microsoft’s strategic necessity, then it appears in some instances anyway, that there’s a chance for rekindling the fiery talks again.