The new tech bubble

[somone]

http://www.economist.com/node/18681576

The new tech bubble
Irrational exuberance has returned to the internet world. Investors should beware

SOME time after the dotcom boom turned into a spectacular bust in 2000, bumper stickers began appearing in Silicon Valley imploring: “Please God, just one more bubble.” That wish has now been granted. Compared with the rest of America, Silicon Valley feels like a boomtown. Corporate chefs are in demand again, office rents are soaring and the pay being offered to talented folk in fashionable fields like data science is reaching Hollywood levels. And no wonder, given the prices now being put on web companies.

Facebook and Twitter are not listed, but secondary-market trades value them at some $76 billion (more than Boeing or Ford) and $7.7 billion respectively. This week LinkedIn, a social network for professionals, said it hopes to be valued at up to $3.3 billion in an initial public offering (IPO). The next day Microsoft announced its purchase of Skype, an internet calling and video service, for a frothy-looking $8.5 billion—ten times its sales last year and 400 times its operating income. And those are all big-brand companies with customers around the world. Prices look even more excessive for fledgling firms in the private market (Color, a photo-sharing social network, was recently said to be worth $100m, even though it has an untested service) or for anything involving China. There has been a stampede for shares in Renren, hailed as “China’s Facebook”, and other Chinese web giants listed on American exchanges.

So is history indeed about to repeat itself? Those who think not point out that the tech landscape has changed dramatically since the late 1990s. Back then few people were plugged into the internet; today there are 2 billion netizens, many of them in huge new wired markets such as China. A dozen years ago ultra-fast broadband connections were rare; today they are ubiquitous. And last time many start-ups (remember Webvan and Pets.com) had massive ambitions but puny revenues; today web stars such as Groupon, which offers its users online coupons, and Zynga, a social-gaming company, have phenomenal sales and already make respectable profits.

The this-time-it’s-different brigade also points out that the 1990s bubble expanded only after numerous web firms were floated on stockmarkets and naive investors pumped up the price of their shares to insane levels. This time, there have been relatively few big internet IPOs (though that is likely to change). And there is no sign of the widespread mania in the high-tech world that occurred last time around: the NASDAQ stockmarket index, a bellwether for the tech industry, has been rising but is still far below its peak of March 2000...

[truedelphi]

1. All the companies that are mentioned actually provide some type of

Service. i have no way of knowing if they are under or over valued.

But back in the late nineties, when "canaries-in-a-hurry.com" could be worth be big money, despite no one I knew wanting canaries-in-a-hurry, none of it made any sense.

My biggest fear about the Silicon Valley stuff right now relates to the notion of "the Cloud." And that future computers will not be sold with storage devices. For example, right now, I cannot get into my YouTube account despite numerous tries. So I lost 110 of my fave videos. Sad but not life threatening.

But what if in five years I cannot log into my "cloud" account? And I lose eveything that keeps my life afloat, from humor articles I am putting into a book, to finances, to whatever?

[Celebration]

2. The "cloud" just suffered a huge setback

Courtesy of an unprecedented attack on Sony from an anonymous Amazon account. I predict that demand will be there for people having their own storage devices.

[truedelphi]

3. That is quite interesting. But how does an Amazon account holder get to

Attack anything?

I thought all an Amazon account could get a person was books and CD's from Amazon. Would love it if you had a link, it sounds very interesting.