Shares of Yahoo Inc. declined on Tuesday after an analyst downgraded its stock, predicting it will be stagnant until it makes smarter product decisions.

Thomas Weisel analyst Christa Quarles downgraded shares of Yahoo to "Underweight" from "Market Weight" in a note to investors. Yahoo faces numerous obstacles in the wake of the protracted and fruitless buyout offer by Microsoft Corp., she said, and shares will be restrained until those obstacles are overcome.

For example, the Sunnyvale, Calif., company has had difficulty attracting and keeping talented leadership. A number of top level executives have recently left the company, according to reports in the New York Times and on a couple of technology blogs.

The analyst also claims Yahoo has lost its focus on the consumer.

"Mail does not make a content strategy," Quarles wrote. "Many Web 2.0 companies have a relentless focus on the consumer - often at the expense of near term revenue - but we want to see Yahoo's products become more consumer friendly and for new product launches to work well the first time."

Yahoo should place its more popular services, such as its photo program Flickr, on its home page, Quarles said. Meanwhile, its sports and finance offerings should dominate content markets.

In addition, too much of Yahoo's management energy has been focused on competing with Google Inc. That strategy has left it trailing its rival, Quarles said.

Yahoo spokeswoman Diana Wang said the company declined to comment on the report.

Microsoft had offered to buy Yahoo for $47.5 billion, or $33 per share, but withdrew the bid when Yahoo Chief Executive and co-founder Jerry Yang asked for $37 per share.

Quarles cut her price target to $18 from $28, implying she expects shares to lose 16 percent from their Monday closing price of $21.45.

Shares of Yahoo fell 60 cents, or 2.8 percent, to $20.85 in midday trading.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.