When Will Yahoo Shares Hit Bottom? (Look Out Below!)

Yahoo shares dropped yet again yesterday, closing at $12.65, in a vicious day across Wall Street.

That’s a decline of 8.07 percent or $1.11, a worse performance that the 7.3 percent decline in the overall market.

This means that Yahoo’s market cap is now at $17.53 billion, which has to make one wonder if perhaps a foreign company, a private equity firm or some outfit with some cash to spare will swoop in and grab it.

But, so far, Microsoft has shown no interest in revisiting its failed takeover bid for the troubled Internet giant.

It should, given the severe valuation drop Yahoo (YHOO) has suffered, which is much more than the other tech shares have suffered in the continuing decimation of the stock market.

Google (GOOG), for example, was off 2.7 percent or $9.13, closing at $328.98 today. Microsoft (MSFT) dropped to $22.30, down 3.1 percent or 71 cents. And Apple (AAPL) lost 1.2 percent, or $1.05, closing at $88.74.

What’s fueling the Yahoo plunge? The same worries about Yahoo’s graphical advertising business, its leadership’s ability to do anything to turn the company around and, of course, simple panic.

Despite its troubles, Yahoo remains one of the top sites on the Web, has a big share in the search business and a lot of valuable products and services.

Yahoo’s third-quarter earnings are coming on Oct. 21, and most expect execs to outline some indication of cost cuts that have been called for across the company recently.

While current results will likely not include the impact of the ongoing economic downturn, meaning they will not be as bad, most expect Yahoo’s fourth-quarter to be brutal.

How brutal? Well, it’s still a long way to zero. But these macroeconomic trends are surely troubling, as Yahoo seeks to right itself.