IBM Now Officially Worth More Than Microsoft 295
liqs8143 writes with news that IBM's market cap has surpassed Microsoft's, making it the second most valuable tech company. When the market closed on Friday, IBM was valued at $207.52B, while Microsoft was valued at $206.52B.
"At one point during the PC era, Microsoft's value climbed three times higher than IBM's. Apparently, this has been a long two decades in Armonk, N.Y., but Microsoft also is no longer the beast it once was. The guard is changing. Besides Apple, there is also Google. While Google is valued at about $170.59 billion, less than the other three, its $31 billion in annual revenue is half of Microsoft's $69 billion and less than a third of IBM's $101 billion. Waiting in the wings is Facebook, which has been valued in the private market for as much as $50 billion, on negligible revenue."
Facebook Revenue (Score:5, Informative)
Re:capitalism fail (Score:5, Informative)
and this is why the current implementation of capitalism is fatally flawed, it is founded on fraud, deception, and innuendo. facebook is valued at $50 billion dollars even though it makes very little money and will wither and die just like every other hit social network when something else comes out.
I don't see the fail.
The "proper" value of a stock is the net present value of its future dividend stream. Even for stocks that don't pay dividends, you can adjust the idea for increase in book value due to retained earnings. In either case, the value isn't just based on the most recent net revenue figures, it's based on profits, and on the anticipated future profits.
If you dig into these numbers a little more, they don't look all that unreasonable to me. Yeah, okay, IBM and Microsoft are neck-and-neck in market cap even though IBM has total revenues almost 50% higher than Microsoft, but Microsoft actually has greater profits ($19B vs $15B) which should send the cap the other way... except that IBM also has much greater assets. As far as their futures go, both companies are going to be productive and profitable both short-term and long-term, but it's unlikely that either of them is going to experience tremendous growth. So... they really are worth about the same.
Throwing Google into the mix, Google is worth almost as much as the other two, but has smaller revenues and profits ($8B)... so maybe that's the fail? Google also has tremendous opportunity for growth. It's currently raking in the lion's share of on-line advertising revenues in the industry, but those are still just a tiny piece of total advertising expenditures -- and online advertising continues to grow really quickly. Even if Google loses market share (and there isn't really any reason to think they will), the pie they're taking a share of is growing so fast that they have lots of growth ahead of them. And that assumes that none of Google's non-advertising ventures are successful. So, while Google currently has smaller revenues and profits, it also has much better prospects for growth than IBM or Microsoft. Again, I think the market capitalization isn't at all unreasonable.
But what about LinkedIn? Yeah, they may well represent a fail. But Lots of people said that about Google when their IPO went crazy. Investors in LinkedIn are gambling but it's not an entirely unreasonable gamble. LinkedIn doesn't have a lot of revenue, but they have demonstrated that they can generate income from their social network, and it's not unreasonable to believe that they'll find ways to generate a lot more. The bottom line with LinkedIn is that they currently have 100 million account holders. If they can find a way to extract $50 from each of them, on average, over the next 10-15 years they'll have justified their current market cap. That doesn't seem so far-fetched to me. It doesn't seem likely enough that I would buy their stock... but I also refused to buy Google for the same reasons.
Does the market mis-price companies at times? Absolutely. Especially when speculators start inflating bubbles. But I don't really see anything so insane here.