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If a Bubble Bursts in Palo Alto, Does It Make a Sound?
New York Times ^ | 04/24/2014 | Annie Lowrey

Posted on 04/24/2014 6:53:21 AM PDT by SeekAndFind

This year, Facebook purchased the mobile-messaging application WhatsApp for $19 billion, or about $350 million per employee and $40 per user, only some of whom even pay the $1 annual fee for the advertisement-free platform. But what was perhaps most remarkable about Facebook’s acquisition of WhatsApp was that the start-up was making any money in the first place. In recent years, Facebook has shelled out 10-figure sums for Instagram and the virtual-reality headset maker Oculus V.R., both of which had scant or no revenue. Ditto for the safe-sexting-enabler Snapchat, which reportedly turned down a $3 billion offer from Mark Zuckerberg.

Those numbers seem as bubbly as a hot bath or cold Champagne, a sure sign that Silicon Valley valuations have soared far higher than Silicon Valley balance sheets can support. A recent downturn in tech stock prices is perhaps indicative of this uncertainty. But if tech really is a bubble, would the rest of the country be harmed if it burst?

There are hundreds more examples of big companies spending eye-watering sums for acquisitions, firms going public at fat valuations, tech stocks reaching high highs and venture-capital firms tossing money at start-ups. That’s not to mention the cultural afterbirth of all that cash, from the medieval-themed weddings to the office ball pits. (If HBO sees fit to satirize your corner of the economy, things have probably gone a bit weird.) Meanwhile, the rest of the country slouches along, unemployment high, wages stagnant, credit tight. But Silicon Valley feels like a foam party.

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Computers/Internet; Society
KEYWORDS: bubble; facebook; paloalto; siliconvalley; snapchat; stockmarket; whatsapp; zuckerberg

1 posted on 04/24/2014 6:53:21 AM PDT by SeekAndFind
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To: SeekAndFind

Over paying for companies is what damaged Intel, CSCO and Oracle


2 posted on 04/24/2014 7:07:33 AM PDT by Zathras
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To: SeekAndFind

Institutional investment in Facebook is still 51%, so yes, if the bubble bursts, it will hurt us and we will hear it, likely because a whole lot of public employee pensions are involved (Oh, hi there, CALPERS who invests heavily in California companies and has a track record of losing billions on tech bubbles...)


3 posted on 04/24/2014 7:18:29 AM PDT by kingu (Everything starts with slashing the size and scope of the federal government.)
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To: SeekAndFind

“A report from Standard & Poor’s released this month found that 1,700 big, nonfinancial companies were holding on to about $1.53 trillion in cash and short-term securities at the end of 2013. The Federal Reserve is currently keeping interest rates very, very low. They’ve been keeping them very, very low for a long, long time. The idea is to spur investors to spend now — but the economy is so crummy that few know quite how to do that.”

No, actually the economy is so crummy that smart investors are UNWILLING to invest in the economy because they know that no one in their right mind will risk investing in economic growth as long as Marxists are in charge of the economy, Marxists who will simply steal any new profits from the makers and “redistribute” them to the takers, letting any losses accrue to the “investors”.

On the other hand, their appear to be a pocketful of inexperienced “Progressive” fools like Mark Zukerberg who were in diapers during the dot com bubble, and who are willing to ignorantly repeat history by pissing away billions on rubbish, sort of one-man dot com bubbles if you wish. And I say to these unlearned billionaire “Progressive” fools: “Why, piss away. Piss away.”


4 posted on 04/24/2014 8:41:33 AM PDT by catnipman (Cat Nipman: Vote Republican in 2012 and only be called racist one more time!)
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some companies take years to make a profit then go nowhere.

other take up to 10 years to make a profit (look at cable networks) then start raking in money

so the answer is, as always, we’ll see.


5 posted on 05/31/2014 12:10:55 AM PDT by KneelBeforeZod (I have five dollars for each of you)
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