
The Companies Worth Less Than Facebook - _pius
http://larrycheng.com/2011/01/12/the-companies-worth-less-than-facebook/
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dstein
It's important to note that stock valuations are derived from the expected
future profitability of a company. Stock is a claim on future profits.
Compared to a company like Halliburton, who has to build billion-dollar oil
rigs before they make any profit, a technology company like Facebook is a lot
more lucrative and thus its stock can inflate quickly if the profits expand
faster than costs. And generally technology costs go down over time while
profits increase exponentially. So you have a powder-keg scenario in Facebook
if, and only if, they find a profitable business model based on their enormous
userbase. And they better find that business model or the stock will crash
like it's the year 2000.

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fleitz
According to their PR they have found such a business model and are now
profitable.

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jerf
"profitable" != dstein's "powder key scenario".

I will totally believe they are profitable, I do not believe that right this
second they are bringing in enough to justify a $50B valuation on that ground
alone.

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noelchurchill
I wonder what the Fortune 500 would look like if people were to guess at which
companies were more valuable than others.

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fleitz
That's pretty much what the stock market is and also the Fortune 500. It's all
people guessing as to the future guesses of what a company is worth.

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netcan
I guess the OP's comment should be reworded _"people who haven't put their
money in it"_

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fleitz
Thats the great part about a public market. Anyone may speak as long as they
put their money where their mouth is. (Or conversely put their mouth where
their money is, aka. talking your book)

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wlievens
Which is not the case with facebook. (not that I'm disagreeing with you)

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nhangen
I won't buy this until FB goes public and we see how it fares in an open
market. Though I won't argue against the current valuation, I'm not sure I
believe it yet.

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netcan
Facebook shares are being traded quite a bit now. YOu could call it a semi
public market.

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sorbus
"Public," in this case, I believe, includes the need for them to disclose
earnings reports.

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16s
Wow... neat list. FB is not more valuable than BMW, AIG or Nokia. There's just
no way. And if it turns out that they are, then something is fundamentally
wrong.

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dantheman
Why? I barely use facebook and it's more important to me than BMW or Nokia,
and AIG should be out of business (but that's another argument). I assume
facebook is more important to most people than BMW or Nokia, and though the
value may be less per person it could be easily be more in aggregate.

~~~
16s
I would think that hundreds of years of engineering (mechanical and
electrical) and solid products used all across the globe would be more
valuable than a social website, but maybe I'm wrong.

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rospaya
You are presuming the stock market is somehow fair.

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16s
Yes, you are right. I was confused. BMW engines deliver pigs to markets so
people can eat. One can buy and sell virtual pigs on FaceBook by playing
Farmville.

To me, actual bacon is more valuable than pretend bacon.

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justin
How "important" work is is only one factor in the creation of value. How much
you produce, how it is valued by other people, what your margins are, what
your future revenue streams will be -- these things are all factored into
company value.

There are many companies that make non-essentials that are valued more highly
than farms and utilities.

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wlievens
Exactly. Not to mention the fact that facebook is near monopoly status. If you
were to add every single car manufacturer together, surely you'd get a much
high valuation.

If the social network space were as diverse (in terms of relative player
weight, not total number of players), we wouldn't be having this discussion.

Facebook's valuation reflects the value of the social-networking _market_
perhaps more than its value as a single business?

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americandesi333
One of the major component of stock valuation is the expected growth of the
company, which somewhat accounted for market and internal 'risk'. However, I
would argue that in Facebook's case the risk is higher than what is used for
this valuation. Therefore, I do not see Facebook being worth more then say
Target.

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phr
I thought EMC bought VMWare?

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dauphin
They did, in 2001.

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sdizdar
Market cap / valuation comparison is only meaningful if you compare companies
in the same industry. For example, priceline.com has market cap of about $21B.
In that respect, facebook valuation is not so high.

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xenophanes
Umm, no. Exactly the opposite. If the market caps in one industry were wrongly
valued relative to another, then investment would move (b/c there would be
opportunity for arbitrage and profit).

Why did you think the economy was divided into separate and unrelated
sections?

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true_religion
Facebook should use the same brilliant strategy that AOL did, and buy out a
clearly sustainable big name company.

Maybe BMW, how about that?

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togasystems
NewsCorp?....well it is final....Facebook won

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democracy
on paper of GS & DST analytics they certainly did

