Is this an over-reaction? I think so. I think Yahoo is incredibly cheap and what most people do not realize is that Yahoo's earnings were in-line despite losing Microsoft as one of its search partners. At 20 times earnings, there have been very few times when Yahoo has been such a bargain, considering that quarterly revenues are up 33% over last year.
Yahoo's current search market share in the US stands at around 28% while Google's is 44% and the trend seems to indicate that Yahoo might lose more to Google. However, the Panama launch, coupled with Yahoo Japan and other ventures like delicious and Flickr, not to mention their new relationship with EBay should stabilize that trend, if not reverse it somewhat. With 400 million regular users, Yahoo is still a dominant force in the search engine wars and the stock will be rewarding for patient investors.