Monday, October 29, 2007

AOL-Times Warner Redux?

"Microsoft is partying like it's 1999. The company's $240 million investment in Facebook values the social-networking Web site at 500 times its estimated 2007 earnings of $30 million. ... Facebook's valuation also equates to 100 times its $150 million of annual revenue", WSJ, 27 October.

"History has shown that whenever companies, no matter how great, get priced above 50 to 60 times earnings, buyer beware. ... But many of today's investors are unfazed by history--and by the failure of any large-cap stock ever to justify, by its subsequent record, a P/E ratio anywhere near 100", Jeremy Siegel, a Wharton professor, in the WSJ, 14 March 2000, about a week after NASDAQ peaked. The article is available at

I have an idea for Bill Gates, the next time Microsoft is considering an acquisition call me. I'm sure I can split my "nominal" fee, of say 10% of the proposed acquisition's price with Professor Siegel and as Nancy Reagan said, "Just say no".

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