Yahoo! ( YHOO) chief Carol Bartz is building a company, not a deal with Microsoft ( MSFT).

That seems to be the takeaway on Wall Street as Yahoo! shares dip close to 3% in afternoon trading.

The selling, amid a widespread market rally, started after a Thomas Weisel analyst Christa Charles released a note saying that Bartz's priority was to "focus on building Yahoo for the long term" and "improving the product before anything else."

The message is clear: Brace for a hit to margins as Yahoo! decides to invest more in improvements and go light on cost cutting. And forget the investors' bet that a search ad deal with Microsoft is in the offing, according to one money manager, who has no Yahoo! positions.

"I think Bartz views herself as a fixer and an operator, not a slash and burner," says the investor. "And let's face it. They didn't bring in someone like Bartz just to sell the search business to Microsoft."