Internet

Facebook stock is not so different from bitcoin

24 Feb 2014

Both are currencies that can be used for certain purposes, but not everything. They depend on networks of people but are not backed by a government. And their worth reflects demand, which is based on murky fundamentals. The trick is to monetize them while they still have value.

How on earth can Facebook justify WhatsApp price?

20 Feb 2014

It takes extraordinary suspension of disbelief – and a new Breakingviews calculator – to see how the social network can bring the messaging startup’s $19 bln valuation in line with its own. WhatsApp must double its user base and persuade them to pay more. It’s a big stretch.

WhatsApp’s Chinese copycat deserves its premium

20 Feb 2014

Tencent’s WeChat app is worth around $30 bln. That’s more than the $19 bln Facebook paid for its U.S. rival, even though the Chinese version has two-thirds as many users. But customer numbers matter less than the ability to make money. WeChat’s prospects justify a higher valuation.

No algorithm makes Facebook-WhatsApp deal compute

20 Feb 2014

Mark Zuckerberg’s social network is spending some $19 bln for the 55-employee, 450 mln-user, no-ads messaging service. Facebook says growth is the point, not making money. That’s the kind of magical thinking shareholders signed up for when they surrendered control to the founder.

Rakuten’s buying spree getting harder to justify

20 Feb 2014

The Japanese e-commerce group’s $900 million purchase of online chat app Viber looks a bargain compared with WhatsApp. But Rakuten’s track record is patchy: it has written off $400 million on past acquisitions since 2012. Deals may create buzz, but investors want earnings.

Edward Hadas: AOL, solidarity and health insurance

19 Feb 2014

The head of AOL managed to say something really stupid about employee benefits two weeks ago, and to sound callous while he was at it. It’s a shame Tim Armstrong came off so badly, because he was grappling with a serious topic without an easy solution: How to share costs fairly.

HBO gives Netflix investors a grim sneak preview

5 Feb 2014

Time Warner disclosed financial details of the pay-TV network behind “Girls” for the first time, which imply it is worth about $17 bln. Netflix already trades at a 40 pct premium to its stronger, more mature rival. That suggests a need for heroic growth and profit assumptions.

Fickle shoppers put Mattel, Zynga in similar boat

31 Jan 2014

The world’s biggest toymaker and the online gamer both need to produce a steady parade of new hits to grow sales. The Barbie maker’s product lineup sputtered during the holidays, but it’s still a better bet than Zynga, whose pricey mobile gaming buy smacks of desperation.

Amazon, investors in race to get earnings joke

31 Jan 2014

Founder Jeff Bezos long prioritized growth over profit. Yet the internet retailer’s Q4 results hint at how margins can improve as sales slow. Charging more for Prime membership could improve them further. Problem is, investors are counting on both growth and higher margins.

Google salvages insurance from its biggest deal

30 Jan 2014

Selling Motorola Mobility to Lenovo for $2.9 bln after buying it for $12.5 bln barely two years ago looks awful. The search giant extracted some value, however, and is keeping loads of patents. The deal was still costly, but it did find a kind of protection for the Android world.

Facebook has another mobile call to answer

29 Jan 2014

The $130 bln social network defied skeptics by generating over half its Q4 ad sales from portable devices, up from zero two years ago. The number of daily visitors is also quickly on the rise. Selling more ads is one thing, though. Making them targeted and unobtrusive is another.

Google’s latest deal makes uncharacteristic sense

27 Jan 2014

The web giant is paying $662 mln for DeepMind Technologies, a UK startup with no sales. But compared to purchases of Nest and Boston Dynamics, the firm’s focus on using neuroscience to teach machines to learn sits firmly in Google’s core business. It’s the next frontier for search.

Apple’s stubbornness on full show before earnings

24 Jan 2014

The longevity of the 30-year-old Mac is one sign of Apple’s persistence. The company occasionally bows to external demands – but rarely admits it. It will add new products and, as Carl Icahn wants, return more cash to shareholders. But outside pressure won’t get any credit.

China web user numbers are investment red herring

24 Jan 2014

Do more users mean more money for internet companies? Some investors think so. After a report showing a decline in microblog users, shares in Weibo owner Sina slid almost 7 pct. Yet what matters more is potential for turning a profit. Investors are hung up on the wrong metric. 

Ed Snowden helps Lenovo justify $2.3 bln IBM deal

23 Jan 2014

The Chinese PC maker has struck a cash-and-stock deal to buy Big Blue’s low-end server business. Previous talks foundered over price. But security concerns have hurt IBM’s sales in the otherwise expanding Chinese market. Lenovo’s ownership could help bring back customers.

Mobile deal exposes lack of security in M&A

22 Jan 2014

The $43 bln VMware, backed by EMC, is buying closely held AirWatch for $1.5 bln. Expanding beyond the competitive business of virtual servers makes sense. But the target’s troubles with Los Angeles schools provide a red flag about jumping into ultra-hot mobile and security.

Edward Hadas: Bitcoin repeats gold-standard errors

22 Jan 2014

The popularity of the pseudo-currency is a sign of economic amnesia. If bitcoin - with limited supply and without government support - were the only currency, it would suffer from the problems of the old hard-money system. The result would be unnecessary panics and crises.

Dropbox $10 bln valuation looks in the clouds

21 Jan 2014

VC funds brave enough to make late-stage investments in the likes of Facebook and Twitter did well. Now BlackRock and others have bet $250 mln on Dropbox. But there’s room for plenty of competitors in online file storage – and that could mean a very different outcome.

Googleization of Yahoo hits pricey speed bump

16 Jan 2014

CEO Marissa Mayer has fired the COO she lured from her former employer, costing Yahoo as much as $60 mln for Henrique de Castro’s 15 months on the job. She may have made the right call, but it’s a reminder that a sprinkling of Googledust won’t on its own get Yahoo growing again.

Net neutrality requires bolder U.S. backing

14 Jan 2014

Washington’s communications watchdog tried not to regulate broadband providers while also preventing them from discriminating between content types. Now a court says it can’t have things both ways. With broadband pipes often oligopolies, internet users need Uncle Sam to step up.