

Why Silicon Valley Should Be Worried - dpapathanasiou
http://gigaom.com/2008/07/17/why-silicon-valley-should-be-worried/

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Hoff
If you want to know the health of an ecosystem, look at the health of the
pilot fish, and not at the whales.

The indications of latent rot or the incursions of new competitors and of
asymmetric solutions can be masked by the sheer scale of an established
business.

The pilot fish are the leading indicators.

Whales can easily coast on revenues and their customer bases and by squeezing
their ecosystems and their partners for a decade or more, even with their
businesses and business models rotting away underneath them.

If the startups in SV are getting squeezed, then SV has something to worry
about.

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dmix
"Microsoft posted a 42-per-cent rise in profit" (globe&mail)

"Google's net income for the quarter was $1.25B, up from $925M" (Techcrunch)

I wouldn't call that bleak.

The Silicon Valley leaders may not be able to maintain their high growth rates
but I doubt they would be affected in the same way other industries have been.

I'd like to see the impact its having on the smaller players and not just the
big advertising companies.

Is this directly affecting the publishers at the bottom of the pyramid?

~~~
dustineichler
True I wouldn't call it bleak either. eBay posted 20% earnings growth although
the stock is down. It is interesting to go through this again though having
been through the first one. It's tough. I remember so many friends and
colleagues leaving for places like Austin or Boston way back when. Now, I
wonder if the same will happen. Engineering wise, I really don't expect many
to leave but the mom and pop shops that rely on high valued incomes... and
maybe business units, always the first to go.

~~~
alain94040
Earnings is the wrong thing to look at when you enter a recession. It's easy
for companies to manipulate earnings for a little while, by shuffling money
around and delaying expenses.

Gross revenue is your leading indicator: are they still selling as much, or
more, than before?

Alain - fairsoftware.net

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matt1
"Now Silicon Valley is in for a long-overdue reality check, one that should
worry one and all. Why? Because the news coming out of advertising-focused
companies is not good."

The article does a good job of explaining how the poor economic conditions are
impacting internet advertising, but this has nothing to do with a reality
check. People have less money to spend so they buy less things. That doesn't
mean that internet advertising models are misguided.

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incomethax
Its kinda ironic, Google had been seeing such high growth rates for a business
of their age and size that it seemed as if they were defying gravity. Add that
to the environment in the Googleplex, and you have a company that doesn't feel
like a company.

This creates the potential that Google will overlook something, which will
lead to some little guy taking their place as they took Microsoft's as the
standard in software development

~~~
ovi256
> standard in software development

Can I please have whatever you're smoking? It seems good.

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toki
This two day old thread about google is somehow related to this article:

<http://news.ycombinator.com/item?id=247046>

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redorb
i think if googles 39 percent growth was a shortfall, its funny, how many
businesses as old as google has investors wanting more than 39 percent yoy
growth?

~~~
diego
Not too many businesses have a P/E ratio of 34 with a market cap of 150B. It's
a matter of expectations, they were expected to grow more than they did and
the stock price had those expectations priced in.

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sabat
Silicon Valley should not be any more worried than the rest of the country or
world.

Actually, given what people are pointing out here, maybe SV should be less
worried than the rest of the country.

