There are multiple reasons why I'm not fond of hardware keys like that:
The first I've already mentioned. If it's lost or misplaced, you've
just lost your way of getting into the system.
Second is the form factor. It's a USB A connector, which is fine when
you're sitting at a desktop or a laptop that you own. What happens if
you need to get into the machine, and the only thing you have is a
cellphone or tablet, which likely doesn't have a USB A port? Do you
keep a selection of dongles with you to make it fit? Or are you SOL?
And if you're at a machine that you don't own, they may well either
prevent you from accessing the USB port or have severe restrictions on
what a USB device plugged in can be. For example, it might be limited
to ONLY a mass storage device and not a USB keyboard. If that's the
case, the Yubikey won't work.
Third, while the Yubikey is powered off the device to which it's
connected, and that's a nifty workaround to this problem, a lot of
hardware keys have a sealed battery. That battery cannot be replaced,
because the device will self-destruct (by design) if you try to open
it up. So you're only good for as long as the battery life lasts.
All that said, you also want to avoid using SMS as your second factor
authentication, because the telecom network is not secure. If an
attacker knows your phone number, they could attempt to steal your
number and receive your SMS codes. While the telecoms have tried to
close this security hole, in many cases, it's an insider attack, which
can't be easily stopped without completely destroying number
portability.
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Tilghman