Investors smart or not?
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| Author | Content |
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| Grishnakh May 13, 2011 12:49 PM EDT |
All the geniuses who ripped the investors who bought Skype from eBay in 2009 don't look so smart now. Not necessarily. The problem with "investing" is that the fundamental rule of valuation is that a thing is worth whatever you can con some sucker into paying for it. So some things have pretty stable values, because lots and lots of people are willing to pay a certain price, and other things have unstable values, like Skype, because only a few entities are willing to pay a lot for it. Skype has cost MS a ton of money, but their financials don't look very good. They've only recently even turned a profit, and it's tiny compared to what MS just paid for them. The only way this'll turn out well for MS is if they somehow use this acquisition to make more profit on their other products and services. Otherwise, it'll turn out like Zune: lots of money invested and mostly wasted because there wasn't enough profit in it. Sure, this turned out really well for that group of investors, but it was extremely risky: they were betting that they'd find a bigger sucker to buy Skype from them for more than they paid for it. They were lucky: they found a big sucker. But they could have been very unlucky too, and had to sell it for much less. It's a lot like the mortgage boom and meltdown: some people got really lucky and sold their houses right at the peak to some sucker, and others held on to their houses for a little too long and suddenly there weren't any suckers left to buy their houses for more than they owed. Just like in a game of Musical Chairs, at some point someone's going to get screwed, and you don't want to be that person. |
| dinotrac May 13, 2011 1:01 PM EDT |
@Grish - There is more to a company's value than profits. For example -- Cisco is in the process of shutting down it's Flip video unit. Flip made money and was getting ready to introduce new (and great) products. But -- Cisco really isn't a consumer camcorder company. They are, however, a video conferencing company and it wouldn't surprise me in the least if some of that Flip technology finds its way into other Cisco products. Ditto for Microsoft/Skype. Wonder what the future of videoconferencing for Windows mobile phones holds? |
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