I have owned Yahoo for clients for a long time. I scaled out of the position this morning (guessing my average price is close to $33, but don't know yet).
I take the market's reaction to mean that a combo is very likely (I don't know, just my read on the reaction). A couple of comparisons have been made here to TWX and AOL and that makes sense to me.
Although I can't document it in writing I owned AOL when the TWX news hit and I sold right away. If Yahoo gets absorbed by MSFT all that is good about Yahoo would be muted, IMO, which is why I have sold the stock and if the deal does not happen I think the stock would head lower.Updated since that post my average price was $32.96.