IBM Now Officially Worth More Than Microsoft

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."

Comments

Re:First post

[BitterOak]

First post - IBM ahead of MS? Big suprise considering OS/2 was such a flop in later years :p

Which is too bad, since OS/2 was vastly superior to Windows at the time. So much so, that OS/2 was the OS of choice in many applications where stability and security was important, such as ATMs.

Re:First post

[dougmc]

Yet OS/2 was quite superior to the versions of Windows that Microsoft had out at the time.

In any event, IBM and Microsoft generally work in different areas now -- considering how IBM has their fingers in everything there's considerable overlap, but for the most part they're very different.

BOO YAAH

[Anonymous Coward]

So i did well into put my assets on IBM back in 1994?, take that carl!

Re:BOO YAAH

[the_humeister]

Pretty much. So I wonder when IBM is going to come out with their Superbowl commercial depicting Apple as Big Brother and IBM as the one setting the masses free?

Re:BOO YAAH

[CronoCloud]

I wonder when IBM is going to come out with their Superbowl commercial depicting Apple as Big Brother and IBM as the one setting the masses free?

These are a little bit in that vein.

http://www.dailymotion.com/video/xw2um_another-ibm-red-hat-linux-advertise_shortfilms

http://www.youtube.com/watch?v=fJA9eiUktcA

capitalism fail

[Lehk228]

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.

Re:capitalism fail

[Anonymous Coward]

The question is not whether Facebook is worth $50 bn. Whether it fails or not doesn't matter if none of that $50 bn is yours (and if it is, it's your own fault). The question is whether someone will force you to invest -- i.e. whether the taxpayers will be made to bail somebody out for $50 bn. That has nothing to do with capitalism, and is just bad government. So in actuality, it's not the current implementation of capitalism that is flawed, but the implementation of government.

Re:capitalism fail

[Opportunist]

The flaw is rooted much deeper. We're not comparing the revenue and industrial strength of companies anymore, we're comparing our expectations. Quite literally. The stock value of a company is tied to the analyst's expectations, not the money they earn. More bluntly, we're comparing whether we will find another idiot to sell those toilet papers to before someone notices their lack of value.

I guess it's obvious that a "honest" company that actually produces and sells goods cannot compete with this.

Re:capitalism fail

[swillden]

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.

Re:capitalism fail

[phantomfive]

lol I had an economics teacher in High School who tried to teach how worthless a dollar was by tearing it up right in class. My friend managed to grab the pieces, tape them together, and buy something that most certainly wasn't imaginary.

Later in life I tried to tell myself that money isn't important, and blah blah blah. Then I got hungry. The hunger reminds me that something is real, and I can buy it with money.

Money will be real as long as people are willing to give you something for it.

Re:capitalism fail

[NoSig]

It could be future earnings. It could also be the expectation that other investors are going to be willing to buy the stock for a higher price in future. I think most investing is based more on the latter and less on the former.

Re:capitalism fail

[blind biker]

The flaw is rooted much deeper. We're not comparing the revenue and industrial strength of companies anymore, we're comparing our expectations. Quite literally. The stock value of a company is tied to the analyst's expectations, not the money they earn. More bluntly, we're comparing whether we will find another idiot to sell those toilet papers to before someone notices their lack of value.

I guess it's obvious that a "honest" company that actually produces and sells goods cannot compete with this.

A couple of years ago I invested in a portfolio of alternative energy companies (top 1 or 2 in solar, wind etc.). ALL of these brought in tons of cash, consistently, quarter after quarter! Since then we had the GUlf of Mexico disaster and Fukushima, and the total amount of extracted oil has certainly not increased. And yet, I am down about 30% on my portfolio value.

After this experience, I learned that there's no point in investing based on fundamentals.

Re:capitalism fail

[JAlexoi]

And I think that Facebook is the right way for seeking investments. I wish all investors would be committed to their investment when investing into a company. I think that those 3 second investors are "playing the market" yet bring nothing to the table.
Some will say that those players bring liquidity to the market, but I believe that liquidity in the market results in shareholders that care about "the quarter" and don't care about the future.

Re:capitalism fail

[Psychotria]

I wasn't exactly talking about money...

Re:capitalism fail

[Archtech]

The "proper" value of a stock is the net present value of its future dividend stream...

... which no one can possibly know, because of the "future" bit.

Re:capitalism fail

[Confusador]

Which no one can possibly know now, so they make bets with other people as to what it will be. Once the future comes, you can look back and see if your predictions were accurate.

Re:capitalism fail

[Confusador]

If you're investing based on fundamentals and looking at portfolio value after 2 years, you're absolutely right that you're doing it wrong. The question for such an investor should be not about the value but whether the income of those investments is what you thought it will be. If the income is still there, then they will continue to post returns for the forseeable future, hence Buffet's comment that "my preferred holding period is 'forever'."

Yeah, the market will do stupid things in the short term (here meaning periods less than about 10 years), and you can make money based on those movements. Those aren't based on fundamentals, though, so if you're in it for the long haul then a market downturn which isn't based on that data just means it's an opportunity to buy more.

Re:capitalism fail

[rathaven]

We aren't comparing expectations we are comparing belief! Analysts are turning surveys and trend data and multiple pieces of other esoteric information regards product, people and economies into those figures based on what we would buy from them. They are measuring our fervour for the companies involved..

I'm not surprised by the figures for Apple, Facebook and Google. We're flawed and some Companies have followers that treat them like a religion.

My surprise is simply, what makes anyone believe in IBM?

Re:capitalism fail

[ALeader71]

That's not a flaw. That is the second rule of capitalism.

1. Eventually, everything becomes a commodity.
2. You can only sell an item for what someone else is willing to pay (hence marketing, emotions, etc).

You wouldn't pay much for Facebook, but others will pay more for Facebook. That follows rule 2.
The fact that another social network will eventually come along and topple Facebook follows Rule 1 and Rule 2. Its how the marketplace destroys the weak and the over grown companies.

Re:capitalism fail

[StripedCow]

Capitalism sucks because consumer protection sucks. Why is facebook worth so much? Because they've locked in all their users. Same with linkedin and twitter.

Imagine a telecom company locking in their users, so users would not be able to call eachother on different networks, or switch between networks. Now that would be an outrage.

Consider also a telecom company that sniffs the calls of its users and sells this information to other companies. That would be an even bigger outrage.

Why does it still work differently with social networks? Well, because consumer protection is too many steps behind. And once it is far behind and interests have been established, it is very difficult to fix the situation.

Re:capitalism fail

[BasilBrush]

And once it is far behind and interests have been established, it is very difficult to fix the situation.

Not really. Many countries have gone from a monopoly telephone company to a plurality of telephone companies which allow users to call each other.

There's no reason why a social network can't be split up. It would require a standard to be established for interchange of status information etc. And legislation to make it happen.

Re:capitalism fail

[Opportunist]

My surprise is simply, what makes anyone believe in IBM?

Stability. It's like Coca Cola or Procter&Gamble. No matter how bad the economy may be, no matter what businesses rise or fall, they'll still exist. These companies will survive virtually everything, they are big enough and diverse enough that a sudden shift in the economy might make them lose a few bucks, but it will never break them. Unlike a company that has a single product like, say, Facebook which is worthless should the social networking fad fizzle overnight.

And while, yes, MS is pretty big as well, they're mostly relying on software and most of that leans heavily on their market position in the OS market. If that should for some odd reason flounder, they will quickly crumble. IBM is quite diverse, also only in the "computer" sector, but offering pretty much anything in this segment, from consumer hard- and software to industry machines.

Re:capitalism fail

[BasilBrush]

A shared delusion isn't the same thing as something that's real. Millions of people believe in ghosts, souls, homeopathy etc. It doesn't make any of them real.

Re:capitalism fail

[StripedCow]

The point was that with telephone companies, consumer protection did not lag too much. Also, the technical obstacles were much lower.

Can you imagine facebook or twitter being forced to open up their API's so they can interoperate with other similar companies? I think they are too big already for that to happen. They have already acquired too much lobbying power. And they will use arguments of the kind "our API's are much too complicted to open up". Just like microsoft did with IE, saying that they could not isolate the browser from the operating system. Yes, IE is losing ground, but that's because they could not lock in their users completely.

Re:capitalism fail

[dkf]

The question is whether someone will force you to invest -- i.e. whether the taxpayers will be made to bail somebody out for $50 bn. That has nothing to do with capitalism, and is just bad government.

There are other ways in which you can end up "forced to invest". An example is where you've got a company (or sector) that is so over-valued that pension funds feel they have to invest in it, otherwise they lag the overall market index. While the fund managers might know that the company is overvalued, there's no way that they're going to say it for fear of getting hounded out of their jobs. (This was one of the engines of the credit bubble.) Do you monitor every trade that your pension fund is doing? I know I don't; I have a real job to do. But what this does mean is that things can go badly wrong with your money.

The basic premise, that things can go wrong which you can do next to nothing about, remains the same. I just don't see that the conclusion you draw from it — that government is the problem — is sustainable. Nor would I say that government is the solution either; that would be foolish. Hanging 10% of all senior financial types on Wall Street from the lampposts of Manhattan to encourage the rest... I'm having problems seeing the down-side of that idea.

Re:capitalism fail

[captain_sweatpants]

Hanging 10% of all senior financial types on Wall Street from the lampposts of Manhattan to encourage the rest... I'm having problems seeing the down-side of that idea.

Seconded!

Re:capitalism fail

[Alef]

The stock value of a company is tied to the analyst's expectations, not the money they earn.

The money a company earns is just a proxy for expected future earnings. Investments have always been based on expectations. And what else should it be based on? It doesn't matter if a company has made lots of money before -- the whole point of investing is that you think it will make money some time after you invest.

Re:capitalism fail

[MrHanky]

Back here in reality, that's not the question at all.

Facebook won't be bailed out by government when people have drifted to another social networking site, just like Myspace wasn't bailed out, and just like AOL wasn't.

Re:capitalism fail

[MadeInUSA]

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.

Wow, and this was modded "Insightful"? Capitalism is flawed because it allows people to try to anticipate the future? The reason facebook is worth 50bn is because there is a large number of people (or a small number of people with large means and beliefs) that think that it either produces lots of good and services (not the case) or WILL produce lots of goods and services (it does produce services and looks like it will produce more in the future).

Capitalism is also about trying to anticipate the future and allocating resources to more productive venues or potentially more productive venues. 30 years ago, many people would also doubt that MS would amount to anything - and, for good and for bad, it produced the infrastructure that allowed hundreds of millions, if not more than a billion, people to be productive with computers. And today, not many people think that MS will keep producing more and more products that will be useful to people so its valuation reflects that.

People can frequently wrong, so it's possible that facebook will amount to nothing. But giving the opportunity for people to invest on businesses they believe on is what is right with capitalism.

Re:capitalism fail

[Psychotria]

Well at least someone seems to understand what I was getting at ;)

Re:capitalism fail

[alexander_686]

First, find some books by Benjamin Graham. Their a good read. He had a famous student you might of heard of - Warren Buffett.

Second, realize that in the short term the stock market is a voting machine - or a beauty pageant. In the long run [5+ years] it is a weighing machine.

Third, realize that the past is gone and that you are buying a company on it's future performance. Or, as Yogi Berra said "Prediction is very hard, especially about the future".

Re:capitalism fail

[stewbacca]

it is founded on fraud, deception, and innuendo

Which is why the best stuff is rarely the most popular. Applies equally throughout life (music, for example).

Re:capitalism fail

[stewbacca]

We're not comparing the revenue and industrial strength of companies anymore, we're comparing our expectations.

The market has been this way my entire adult life (I'm 41). There are a lot of good stock market themed movies from the 80s that demonstrate this nicely ( I like the one with Christian Bale as the serial killer).

Re:capitalism fail

[khallow]

The flaw is rooted much deeper. We're not comparing the revenue and industrial strength of companies anymore, we're comparing our expectations.

It's a feature not a bug. It makes no sense to value, for purchase by us, a good or service any other way that what we expect to get out of it. If we lose money because our expectations were wrong, then the disease is the cure. That is, we learn from that experience, and have a more realistic expectation next time.

I guess it's obvious that a "honest" company that actually produces and sells goods cannot compete with this.

Not to me. There are a lot of "honest" companies doing just fine whether on the stock market or not.

Re:capitalism fail

[khallow]

A couple of years ago I invested in a portfolio of alternative energy companies (top 1 or 2 in solar, wind etc.). ALL of these brought in tons of cash, consistently, quarter after quarter! Since then we had the GUlf of Mexico disaster and Fukushima, and the total amount of extracted oil has certainly not increased. And yet, I am down about 30% on my portfolio value.

These companies are in large part political merchants. Their profit depends on whether they can obtain funding from various governments. With the Democrat loss of the US House of Representatives, the stock market expected these companies to receive considerably less public funding (perhaps factoring in future Republican gains as well) and priced the companies appropriately.

All I can say is that if you missed that, then you weren't investing on the fundamentals.

Re:capitalism fail

[swillden]

It's insane because it's imaginary. It's an imaginary market and it's imaginary value. It's imaginary income. They are also imaginary dollars; imaginary worth imaginary costs. The WHOLE system is imaginary.

Obviously. But so what? What would be real? Gold? A system based on metals would be equally imaginary. The metals might be real, but their value is just as much a collective societal decision as our current approach of believing that audited bits in a computer have value.

The only system that would be truly "real" is barter, where goods with actual value to improve human life are exchanged for other actual goods. However, that system has such insanely high transaction costs that it's simply unworkable. If you're going to have trade, you need a common medium of exchange, and that medium is going to be arbitrary and, to use your word, "imaginary".

Re:capitalism fail

[swillden]

It could be future earnings. It could also be the expectation that other investors are going to be willing to buy the stock for a higher price in future. I think most investing is based more on the latter and less on the former.

In the case of non-dividend stocks, it absolutely is the expectation that other investors are going to be willing to pay more in the future. That future willingness could be based on emotion or stupid decisions, or it could be based on an actual increase in the value of the company.

If I buy Apple stock, for example, (Apple, like many tech companies, doesn't pay dividends), I absolutely do expect to be able to sell that stock for a higher price in the future. Not because I'm betting that future investors will be dumb, but because I believe that Apple will have increased in value by continue to expand sales of their current lineup of products and by creating new, innovative, products that will become market leaders. Their profits will have continued to grow, resulting in a combination of increased assets and increased investment in further growth. In fact, the reason companies choose to retain earnings rather than paying dividends is because they believe that they have opportunities to expand, and expect to need that cash. Once companies reach a level where significant expansion isn't all that likely (e.g. IBM), they start paying out profits in dividends.

This is all very rational and reasonable. I'm not saying that the markets are never irrational, but buying stock today on the expectation that it will be worth tomorrow based on the company's history and prospects is usually very rational.

Re:capitalism fail

[swillden]

The "proper" value of a stock is the net present value of its future dividend stream...

... which no one can possibly know, because of the "future" bit.

Obviously no one can know, but it's possible to make a pretty good estimate for the near term. As you look further into the future the uncertainty increases... but as you look further into the future the effect of those profits on the net present value decreases. Bottom line, it is often possible to predict with surprising accuracy.

Keep in mind that this isn't some sort of newfangled idea. It's a necessary feature of any society above the hunter-gatherer level -- and even nomadic hunter-gatherers have to engage in speculation about how much effort to invest in traveling to less-utilized lands, and which ones. Certainly as soon as you start farming your food you're engaging in constant, large-scale speculation of the future. All of those seeds you plant are food that you actually could have eaten instead, and the effort you put into weeding (and, if you're more advanced, soil preparation, fertilization, irrigation, pest control, etc.) is all a calculated gamble on the future, that your crops will survive to be harvested and that you'll be around to harvest them. You also have to make bets on how much to plant, where to plant, when to plant, what to plant, etc.

I could cite endless examples, from whether or not to go to school, and how much, to whether to have a family, to the more obvious economic guesses we make... life is largely about trying to peer into the future and predict outcomes based on decisions we make today. These predictions are based on our current knowledge and understanding. Investing is no different, just a little more abstract.

Re:capitalism fail

[Compaqt]

>The "proper" value of a stock is the net present value of its future dividend stream.

Future dividend stream for how long?

And how do you calculate the net present value?

Re:capitalism fail

[ChienAndalu]

In a capitalist society you have control over your pension funds.

Re:capitalism fail

[defcon-11]

blah, blah, net present values, p/e ratio, these numbers are all meaningless and mostly tell you how the company has done in the past, not in the future. Never, ever use numbers to justify a stock purchase. There are only 2 reasons you should ever buy a stock. 1. the value of the company's product or service is better than their competitors. 2. People want to buy stuff in their market area. These 2 reasons are often hard to judge for industries that you don't know anything about, so you need to stick to things you know. For example, Caterpillar has had a nice run. Do you think it's going to continue going up? You could make a reasonably guess that as long as commodities prices stay up, mining will keep going crazy, and Caterpillar will keep getting large new orders. But, unless you work in construction/mining, you probably have no idea if their 2011 models offer a good value compared to their competitors, and unless you work with raw materials, you probably don't know whether our current high commodity prices are real, or just another bubble. Instead of investing in Caterpillar, invest in an industry where you know the answers to these questions, and you can make an informed decision. Obviously, the industry you work in is a good choice, unless of course your industry doesn't meet rule #2, then you're screwed.

Re:capitalism fail

[Teun]

The stock value of a company is tied to the analyst's expectations,

Analyst's?

In this particular case it's the speculators' tricks that cause this price.

These guys aren't in it for the (longer term) profits, they just want to make a quick buck on the hyped value.

Re:capitalism fail

[defcon-11]

It's not imaginary at all. When you buy shares of a company you actually, legally, own a slice of that company. You're entitled to attend share holder meetings, vote for board members, etc. Mature companies give you dividends which are your share of the company's profits. Less mature companies forgo dividends in the interest of reinvesting for future growth. These shares are then traded on a market which prices them in anticipation of future dividends/equity sales.

Re:capitalism fail

[SydShamino]

Only if you directly control them - which most people in any society don't have time to do unless their day job is as a pension fund manager.

Otherwise you have to trust someone. Sure, there may be a pension fund out there with specific guidelines that require investment in only green companies, or only companies that aren't Facebook. But - - - - there's no guarantee in a capitalist society that there will be a given company that caters to your specific wants.

So no, overall I don't think most people have the ability to control their own pension funds (and work their day job).

Re:capitalism fail

[phantomfive]

oh, well, if you don't understand how the stock market has value, then stay out of it. You'll just end up losing money. But that doesn't mean it doesn't have value.

Re:capitalism fail

[Technician]

Buy low sell high. Too many people sell low and buy high because it is rising only to finally sell when it is low.

Yeah, the market will do stupid things in the short term (here meaning periods less than about 10 years), and you can make money based on those movements.

I love a stupid market. It's how a few become rich. If everyone did the exact same thing, the market would move very little and it would be hard to make a buck. As the market moves up, the sell orders would pour in correcting the rise. As the market moves down the buy orders would pour in correcting the fall.

Go counter to the market. Buy during a selloff and sell during a bubble. It isn't difficult.

Re:capitalism fail

[BeanThere]

Facebook's valuation is based on demand from Goldman Sachs, whose business model is to use Federal "stimulus" money and to socialize losses - pray tell, how is that an example of capitalism?

Re:capitalism fail

[NoSig]

I agree. It is very rational for each individual market participant, and sometimes it even works out well for the whole as well. The problem is that if you are investing based on your expectation of other people's expectations, then if you really are rational, you are engaging in a psychological endeavor of trying to predict people over trying to predict the value of the actual stock. Now people aren't complete morons on average, so there is going to be some correlation between value and people's expectation of value and between that and your expectation of people's expectation of value. However, you are now twice removed from value by two levels of expectation. Worse, you are not predicting a persons' expectation, you are predicting a group's expectation, and in that group every cognitive bias that people have is sure to be played out at least a little -- with a person you couldn't be sure, but with a group you can. The value of the stock is fundamentally unpredictable and not even necessarily well defined, but people's cognitive biases are very well studied over the last decade. So it can easily become a game where predicting psychology of other market participants is more important than predicting value, and then there's trouble because the market becomes divorced from reality. The trouble comes in precisely because it is rational for each market participant to focus on the important thing, and if that thing isn't real value, then the rational market participants won't focus on that.

Re:capitalism fail

[swillden]

>The "proper" value of a stock is the net present value of its future dividend stream.

Future dividend stream for how long?

Forever, though a realistic discount rate means that the far-future dividend stream (beyond a couple of decades) contributes trivially.

And how do you calculate the net present value?

http://en.wikipedia.org/wiki/Net_present_value

Re:capitalism fail

[UnknowingFool]

Which is why MS is behind Apple and IBM. Given the history of MS under Ballmer, they haven't expanded into new markets and seen financial success. Thus investors are not optimistic about their future.

Re:capitalism fail

[cherry-blossom]

Consider also a telecom company that sniffs the calls of its users and sells this information to other companies. That would be an even bigger outrage.

Why does it still work differently with social networks?

It works differently because social networks offer their services for free. Telecoms get cash for their services and social networks ( mainly Facebook) get your personal data (instead of cash).

Re:capitalism fail

[StripedCow]

Ok, imagine that AT&T made their phone services free of charge, in return for being able to "spy" on their users. Do you think that people, and regulators, would accept that?

If you still answer "yes" to the above question, then imagine that AT&T disallowed people to change to a different provider. Don't you think that situation is a little awkward? And still we accept it from social media.

Re:capitalism fail

[yuhong]

Even worse is compensating executives based on it.

Re:capitalism fail

[swillden]

I agree. It is very rational for each individual market participant, and sometimes it even works out well for the whole as well. The problem is that if you are investing based on your expectation of other people's expectations, then if you really are rational, you are engaging in a psychological endeavor of trying to predict people over trying to predict the value of the actual stock.

Depends on the time frame.

If you're looking long-term, then it's utterly useless to try to predict peoples' beliefs. Long-term, companies that are well-managed and have good products (and good R&D for producing new products) will generally produce good value for investors.

If you're looking short-term, then, yes, it's pretty much a psych-game, trying to predict which way emotions will swing. That's called "speculation", not "investment". If you're a *good* speculator, you may be able to make a lot of money. More likely, you'll lose your shirt eventually even if you succeed for a while.

Re:capitalism fail

[AmberBlackCat]

I figured they are not determining Facebook's value based on how much income the company has. Rather, I think they're basing the value on how many people are paying attention to Facebook, and how much information Facebook can gain from those people.

Re:capitalism fail

[roman_mir]

pension funds feel they have to invest in it, otherwise they lag the overall market index. While the fund managers might know that the company is overvalued, there's no way that they're going to say it for fear of getting hounded out of their jobs.

- yet another sign of a failed government - the type that taxes your income instead of living on a much smaller budget, that could be financed through alcohol/vice/excise taxes and pretends that it's giving you security by forcing you into these 'pension plans', which are terrible if you actually want to have a pension.

Re:capitalism fail

[shutdown -p now]

The only system that would be truly "real" is barter, where goods with actual value to improve human life are exchanged for other actual goods.

There's one thing that has actual value to improve human life - energy. Now obviously you can't easily barter joules, but you can use them as backing for your currency. Unlike metals, they represent actual useful work that can be performed - any kind of work - so they're never obsolete. Also unlike metals, you have a naturally growing supply that is tied directly to the growth of your economy, and in a way that's rather hard to cheat (it's not easy to expand energy producing capacity).

Re:capitalism fail

[Anthony Mouse]

Go counter to the market. Buy during a selloff and sell during a bubble. It isn't difficult.

It sounds easy, the problem is picking the right time. Look at the history of Microsoft: In the two years between 1995 and 1997 their stock price more than tripled from ~$5 to ~$15. Then it went from $15 to more than $50 between 1997 and 1999. And then it quickly fell back to ~$35 the next year. It hasn't materially exceeded that last price at any time since and has in fact slowly lost almost 30% of its value since then.

The trouble is that it's far too easy to see a bubble and sell Microsoft for $15 in 1997 and then buy the same shares for $35 during the sell off in 2000, when anyone with the advantage of hindsight can see that what someone should have done is sell Microsoft for ~$50 in 1999 and then never reinvest in it again.

Re:capitalism fail

[Anthony Mouse]

There is also the matter of brand. We have all these religious wars about Windows vs. Linux and all that, but the fact of the matter is that there is no fundamental business difference between a webserver that runs Windows and one that runs Linux. Both will do the job, they're effectively fungible, so the choice of one over the other comes down to personal preference. So brand matters.

And the trouble for Microsoft is that they've ruined their brand. IBM is known for making boring, stable, reliable products. Microsoft's reputation is as a monopolist that makes buggy, unstable, incompatible, malware-infested crap with industrial strength vendor lock-in. A large plurality of their potential customers will avoid them out of principle unless it simply can't be avoided. That is a pretty serious disadvantage when you're selling fungible products.

Re:capitalism fail

[Joe Snipe]

Blatant +5 strawman

Re:capitalism fail

[evilviper]

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.

10+ years ago, there was an internet company whose value was through the roof, and were the talk of the tech stock world, even though they had been in business for a few years, and yet had still never even managed to brake even. A sign of the tech bubble for sure! The name of this company? Amazon.com

To be a bit less snarky... it's true there were a couple social networking sites that were a minor hit before facebook. Hell, maybe facebook will fail... BUT they've currently got a couple orders of magnitude more customers than the likes of myspace ever did, and networking effects are not to be ignored. Maybe something else will come along and steal facebook's users, but there's also the chance facebook is the plateau, nothing else will gain any traction, and they will dominate the landscape for decades to come, only gradually fading, and eventually falling into irrelevance as new technology eliminates the intermediary role facebook.com currently plays.

If you or I knew the correct answer with any certainty, we could be making obscene amounts of money.

Re:capitalism fail

[symbolset]

Something like 90% of companies fail in the first decade. Most of the rest don't survive the retirement of the founders by a decade. IBM becomes 100 years old on June 16th of this year, though it traces its ancestry back 30 years more. When a company has survived the retirement of its founders for so long it means that it has management processes in place to become nigh immortal.

Re:capitalism fail

[jawahar]

I believe unless Govt imposes cap on market capitalization of big companies there is no incentive for entrepreneurs to innovate or invent or create new jobs in the economy

Re:capitalism fail

[symbolset]

Investors don't give Microsoft's earnings - past or future - full credit because the company has proven itself a spendthrift. They're like an idiot cousin any of us might have who hits it big in the lottery and can be expected to fritter it all away shortly. Except of course that they hit the jackpot every single day. Several times each day. It takes more foolishness than should be humanly possible to be reliably rid of that much excess. Somehow though, the company is gettin' her done.

Numbers on this scale are hard to grasp. To give you an idea of the scale of this foolishness, at a modest 8% APR the $7B Microsoft has burned in their Online Services Division since it last turned a profit would return over half a billion dollars a year - forever. Five hundred and sixty million dollars a year interest is enough money to employ a small US town or a respectable city in India, China or Pakistan, full time for the rest of forever. Add the $8.5 billion they spent on Skype and the money from their other failed acquisitions and it's enough money to migrate the entire US carbon-based electricity system to clean renewable next-generation geothermal energy over a decade just from the interest and have the principal and some capital growth left afterward too. Add the $100B in stock buybacks from the last decade that didn't achieve the goal of lifting the stock price and it's enough money to do those things, wire gigabit fiber to every US home, and fund commercially viable space exploitation too - without ever touching the capital. One Hundred Billion Dollars is the inflation adjusted price of The New Deal. $100B is more money than the entire 2004 Gross Domestic Product of Pakistan when their population was 152 million souls and they commanded the natural resources of their 307,000 square miles of our planet.

All Microsoft has bought with that lost power is the right to throw more bales of money on that fire. It's sick. It's disgusting. It ought not be possible. It is possible though, and perfectly legal. That so many have done so little with so much is appalling. It's offensive. It's wrong. The stock market is not rewarding this behavior, which is right and good.

Re:capitalism fail

[Anonymous Coward]

That has nothing to do with capitalism, and is just bad government. So in actuality, it's not the current implementation of capitalism that is flawed, but the implementation of government.

Were this any other system, we are told "that's how it always ends up" and "inevitably, human nature is X, so we need a system to take that into account."

What makes capitalism so special it gets preferential treatment?

It looks like capitalism doesn't account for human nature, despite the cheerleaders saying that's what's so great about it.

I am shocked I tell you, shocked.

Anything else, we'd say "They tried it in Delusionville circa the era of denial, and it didn't work then. Why do people keep getting these myths that it can work?"

Smells like a double standard.

(and if it is, it's your own fault)

Ah, capitalism, the infallible rapist, forever blaming the victim. And any flaws it may have is simply our fault for not implementing it correctly.

Re:capitalism fail

[SvnLyrBrto]

> If you still answer "yes" to the above question, then imagine that
> AT&T disallowed people to change to a different provider. Don't
> you think that situation is a little awkward? And still we accept it
> from social media.

How does social media disallow you from changing to a different provider? Facebook may be the hot thing now. But really, it's the same functionality and the same network of friends I had on Myspace, and Tribe before that, and Friendster before that. Before too long, a new social network will become the thing to use, and we'll all have to switch and re-create our networks of friends yet again, and Facebook will have the same virtual tumbleweeds that all the others have now. Hell... there's no lock-in that stops me from stopping using Facebook other than the fact that my friends all use Facebook. As fickle as the public is, Friendster could, theoretically, become trendy again tomorrow.

The only one that's differentiated itself in any significant way is LinkedIn. And that's just marketing. There's nothing fundamentally different that prevents everyone from, for example, using alternate Facebook accounts for their professional networking... or deciding that Tribe would be great for that purpose.

The operating system that actually runs your computer though... that's an entirely different beast from J. Random web service.

Re:capitalism fail

[swillden]

Interesting idea. I really like it, actually. It's worth some thought.

It brings up an interesting connection with bitcoin, which boils down to almost the same idea. Coins are "minted" through a computationally-intensive discovery process which creates a real limit on the rate they can be created -- and ties them somewhat to power consumed. Of course, creating a bitcoin means actually consuming the power, so it can't be used for anything else. Using currency as a representation of energy available to be used makes a lot more sense.

The most obvious problem I see with the idea is that energy is really hard to store, so all value in an energy-backed currency would end up tied to ongoing production -- which can never be fully reliable. So if the plant that produces the energy that backs the money in your pocket gets smashed by a meteor, what does that do to the money in your pocket? Still, it's hard to see how it can be worse than purely fiat money.

Hmm. If we ever do find a good way to safely and inexpensively store large amounts of energy your idea would be eminently practical.

Re:capitalism fail

[shutdown -p now]

The most obvious problem I see with the idea is that energy is really hard to store, so all value in an energy-backed currency would end up tied to ongoing production

Yes, pretty much.

So if the plant that produces the energy that backs the money in your pocket gets smashed by a meteor, what does that do to the money in your pocket?

Well, backed currencies still have their value determined by the market, in practice. The fact that they can be theoretically traded for the backing equivalent is taken into account for market valuation, but it's not the only factor. So I would assume that, if one plant goes down, it would result in a very small reduction of effective market value, because now the government cannot honor the promise to convert the entire money supply into energy, should everyone bring their dollars in. Of course, the chance of that happening is very slim, and the replacement would likely be on the way, hence why the market be unlikely to react in any noticeable way.

Alternatively, the government may choose to re-evaluate the existing money (i.e. to change their guarantee to trade it for a certain amount of energy by adjusting said amount). This would, of course, negatively affect their credit of trust, so if they re-evaluate it higher later (once plant goes back online), the market would trade for a lower effective value.

In the end, the question is the same as what would have happened to, say, gold-backed dollar if someone would have gotten into Fort Knox and vaporized part of the gold there. I wonder if anyone has made a detailed treatment of that back before the fiat currency era?

Hmm. If we ever do find a good way to safely and inexpensively store large amounts of energy your idea would be eminently practical.

It's not really my idea. It has been floating around for a long time - Technocracy Movement has come up with it back in 1930s, and I doubt they were the first ones - and it has been a staple of many a science-fiction story since then under various names such as "energy credit" or "ergthaler".

Re:capitalism fail

[SomeStupidNickName12]

huh? how the hell is that supposed to work? You can't stop a company growing in size. Imagine if an IBM or a Microsoft came up with the next generation of "ipod" like technologies. The type of tech that turned apple from a liquidation waiting to happen in the 90s to the most valuable tech company today. The company would double in size and exceed any market cap imposed by government.

Re:capitalism fail

[tehcyder]

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.

But the emperor's new clothes are really cool this time!

Re:capitalism fail

[tehcyder]

The question is not whether Facebook is worth $50 bn. Whether it fails or not doesn't matter if none of that $50 bn is yours (and if it is, it's your own fault). The question is whether someone will force you to invest -- i.e. whether the taxpayers will be made to bail somebody out for $50 bn. That has nothing to do with capitalism, and is just bad government. So in actuality, it's not the current implementation of capitalism that is flawed, but the implementation of government.

Why the fuck would the government bail out facebook?

Re:capitalism fail

[khallow]

then buy the same shares for $35 during the sell off in 2000

You mean 2001. 2000 was clearly a year of decline. I know because that is what I did, holding off in 2000 and buying limited tech stocks in 2001. Even then, I was warned, accurately as it turned out, that the stock market, particularly for high tech, wasn't likely to do much for the next few years.

Re:capitalism fail

[BraksDad]

Stocks are like baseball cards withouy the pictures

Re:capitalism fail

[swillden]

It's not really my idea. It has been floating around for a long time - Technocracy Movement [wikipedia.org] has come up with it back in 1930s, and I doubt they were the first ones - and it has been a staple of many a science-fiction story since then under various names such as "energy credit" or "ergthaler".

I read a lot of science fiction, golden era to contemporary, so it surprises me I haven't run into it. Or maybe I did and it just didn't stick.

Re:capitalism fail

[tehcyder]

huh? how the hell is that supposed to work? You can't stop a company growing in size. Imagine if an IBM or a Microsoft came up with the next generation of "ipod" like technologies. The type of tech that turned apple from a liquidation waiting to happen in the 90s to the most valuable tech company today. The company would double in size and exceed any market cap imposed by government.

In the same way that you can't prevent companies forming cartels, using child labour or acting as monopolies?
Not if you leave it to the free market to decide, you can't.

Re:capitalism fail

[tehcyder]

The stock value of a company is tied to the analyst's expectations, not the money they earn.

The money a company earns is just a proxy for expected future earnings. Investments have always been based on expectations. And what else should it be based on? It doesn't matter if a company has made lots of money before -- the whole point of investing is that you think it will make money some time after you invest.

An investment should be based on discounted future cash flows, which is why it is illogical to value facebook so highly when they don't earn enough money to pay out any fucking dividends. All you are doing with facebook is taking a punt on a large scale pyramid selling scheme.

At least Apple make money, even if they don't actually distribute it to heir shareholders.

Re:capitalism fail

[tehcyder]

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.

The thing is, I would like to see this backed up with some actual numbers, e.g. if Google expands its sales at x% a year, it will generate y billion dollars extra profit over the next z years, then discount these cashflows. At least you could measure the projected growth against actual results every year, and adjust the calculations accordingly.

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.

If Linkedin is anything like other social networking sites (and, yes, I know it's for business users) you will be able to extract approximately $0 out of 99% of users.

Re:capitalism fail

[tehcyder]

The "proper" value of a stock is the net present value of its future dividend stream...

... which no one can possibly know, because of the "future" bit.

No, but you can certainly look at historical evidence of dividends paid, and expected future growth forecasts to get a reasonable idea of what future dividends will be.
It's certainly more scientific than believing Facebook is "worth" $50 billion because at some time in the future most of its hundreds of millions of users may decide to act against all previous experience of human internet behaviour and pay for something they can get for free elsewhere.

Re:capitalism fail

[tehcyder]

LinkedIn? Please.

No thanks.

Re:capitalism fail

[tehcyder]

blah, blah, net present values, p/e ratio, these numbers are all meaningless and mostly tell you how the company has done in the past, not in the future. Never, ever use numbers to justify a stock purchase. There are only 2 reasons you should ever buy a stock. 1. the value of the company's product or service is better than their competitors. 2. People want to buy stuff in their market area. These 2 reasons are often hard to judge for industries that you don't know anything about, so you need to stick to things you know. For example, Caterpillar has had a nice run. Do you think it's going to continue going up? You could make a reasonably guess that as long as commodities prices stay up, mining will keep going crazy, and Caterpillar will keep getting large new orders. But, unless you work in construction/mining, you probably have no idea if their 2011 models offer a good value compared to their competitors, and unless you work with raw materials, you probably don't know whether our current high commodity prices are real, or just another bubble. Instead of investing in Caterpillar, invest in an industry where you know the answers to these questions, and you can make an informed decision. Obviously, the industry you work in is a good choice, unless of course your industry doesn't meet rule #2, then you're screwed.

You are still trying to predict the future, except without any mathematical basis that can be tested later and used as feedback. You'll be able to say "well, I was wrong/right in my guess", you won't have learned anything that will help with you next investment decision.

Re:capitalism fail

[tehcyder]

The point is though, that Facebook should be valued at $50 billion now if it will actually make more than $50 billion in profits in the next fifty years (after which discount factors make the further calculation irrelevant).
We cannot tell the future, but we can at least put together a fifty year cash flow showing exactly when these profits start to appear, together with an explanation of how they will be generated. It doesn't matter if five billion people use Facebook if no-one actually spends any money there. Now, Facebook may well make their money Ilike Google) from advertising or selling users' information: if so, this can be quantified in terms of future cashflows too.

Re:capitalism fail

[tehcyder]

I figured they are not determining Facebook's value based on how much income the company has. Rather, I think they're basing the value on how many people are paying attention to Facebook, and how much information Facebook can gain from those people.

That still doesn't make Facebook worth anything unless they can sell the information and/or use it to encourage advertisers a la Google.

Re:capitalism fail

[swillden]

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.

The thing is, I would like to see this backed up with some actual numbers, e.g. if Google expands its sales at x% a year, it will generate y billion dollars extra profit over the next z years, then discount these cashflows. At least you could measure the projected growth against actual results every year, and adjust the calculations accordingly.

If you read analyst reports you'll get enough of that to choke a horse.

If Linkedin is anything like other social networking sites (and, yes, I know it's for business users) you will be able to extract approximately $0 out of 99% of users.

LinkedIn already extracts money from some users to get additional features, and from recruiters who want to datamine the network looking for leads. $50 per user over 15 years seems high to me, too, but not that unreasonable. Plus you know they're going to grow well beyond the current 100 million user mark.

Re:capitalism fail

[Shotgun]

It's not Facebook that will be looking get bailed out. It will be AIG or Bank of America or some other such entity that is "to big to fail", and yet gambles like a drunken sailor because they have legislatures on the hook, and bureaucrats installed in critical places.

Re:capitalism fail

[Shotgun]

What's that you say? A sort of "Anti-Dog-Eat-Dog Rule"?

Re:capitalism fail

[Shotgun]

It wouldn't. It would bail out the financial institutions with political connections that invested in Facebook.

That being said, why would the government bail out Chrysler?

Re:capitalism fail

[Shotgun]

And with millions, or even billions, of dollars on the line, you don't think these speculators would hire an analyst or two? They won't be speculating long if they're that dumb.

Re:capitalism fail

[Alarash]

It is, in fact, capitalism, whether you like it or not. I'm not against capitalism (connecting people who need money - companies - with people who have money - investors - is a good idea). However sometimes the said investors will create a "bubble" to make short to medium term profits (2000's internet bubble, 2008 sub-primes bubble, and many more that go unnoticed) and if it goes too far, you have to bail the intermediaries out (banks). Facebook is worth $50 bn just because people say so. They say so because it's now on every movie or band poster ("follow us on facebook!"), so it's hype and people value that. If you're an advertiser can't just ignore the fact that more than 500 million people is your audience on that website. Is this worth $50 bn? I don't know (I don't think so, but my opinion is irrelevant), but some dudes with a lot of money think so.

Re:capitalism fail

[jawahar]

huh? how the hell is that supposed to work? You can't stop a company growing in size.

Can we stop https://secure.wikimedia.org/wikipedia/en/wiki/Fed

Facebook Revenue

[phantomfive]

In case anyone was wondering, Facebook's 'negligible revenue' is approximately $1billion, with profits of around $300million. Sources at this point seem to be mainly rumor, and vary, but are in the same range.

Re:Facebook Revenue

[Kjella]

It might be negligible for their market cap, but I'll gladly take the small change off their hands ;)

Re:Facebook Revenue

[Anonymous Coward]

And that means what, then - that if Facebook continues to profit at its current rate, it'll take them 160 years to actually make as much money as they're supposedly worth?

50 billion for a company that makes 300 million per year still seems overvalued to me.

Re:Facebook Revenue

[Alef]

I do think Facebook is overvalued, but that said, I'd say most of their value is in the fact that they own a pretty extensive database with very detailed information on a fair percentage of the worlds population. And that's gotta be worth something to someone.

Re:Facebook Revenue

[jkmartin]

Let me find another company with around $300 million in profits. Here's one: 100% rise in sales over the last 10 years, $1 billion increase in sales over the last 5 years, stock price up more than 100% over the last 5 years. Wow, this must be an exciting and dynamic company pioneering a new market...what business are they in?

It's Family Dollar. They do discount retail. Their market cap is $6.5 billion.

I haven't figured out how Facebook makes any money other than taking a cut on the sale of imaginary farm tractors. Let me check my Facebook ads...something about myLife which appears to be a stalking service, a credit card made of carbon fiber with a $500 annual fee, a coupon to buy Levi's jeans (I didn't even know Levi's was still around), and University of Phoenix. This doesn't sound like a very lucrative ad market.

I hope Facebook does go public at $50 billion. I'm sure people will buy it at that price. I doubt many of them will be around after 6 months. I don't think any of them will keep the stock for a year.

Re:Facebook Revenue

[phantomfive]

Apparently Facebook has been cutting more and more into Google's ad revenue. Google makes a ton on web ads, so if that's true, then they do have a lot of room for growth. Who knows if it's true, though.

Re:Facebook Revenue

[ub3r n3u7r4l1st]

I will certainly keep the stock for a few hours.

Re:Facebook Revenue

[tehcyder]

I do think Facebook is overvalued, but that said, I'd say most of their value is in the fact that they own a pretty extensive database with very detailed information on a fair percentage of the worlds population. And that's gotta be worth something to someone.

Fair enough, if it's worth $50 billion, that's what what Facebook should be valued at.

$50 billion for Facebook?

[MrEricSir]

Facebook claims they have 500 million users. That's $10 per user.

If I paid you $10, would you sign up for my new social networking site? We could do away with Facebook.

Re:$50 billion for Facebook?

[gabebear]

Hell, I'd sign up at least several thousand times!!!

Re:$50 billion for Facebook?

[BasilBrush]

Sign up, sure. But $10 wouldn't make me stop using Facebook in favour of your network. My family and friends and my photos are already on Facebook.

Re:$50 billion for Facebook?

[stewbacca]

Only if by "before that" you mean 1988, (the last time I was a teenager), since only teens use Myspace.

If I were Zuckerberg, I'd send a Christmas card to that Tom guy from Myspace every year for driving every adult with any evaluation skills at all away from Myspace and to Facebook.

Re:$50 billion for Facebook?

[icebraining]

Actually, no. MySpace has a peak of 76M users. So 400M+ users on Facebook were never on MySpace. (Yes, there are multiple accounts, spammers, etc, but so there were in MySpace - I see no reason to assume the proportion is different).

As an anecdote, I know plenty of family members who were never in any social network (didn't even had IM accounts, just email) and are now on Facebook.

Re:$50 billion for Facebook?

[RobDude]

Not really.

A few of my friends were on MySpace, but it never had anywhere near the following that Facebook has. Facebook gained enough momentum that even people who struggle to check their e-mail setup (or had someone else setup) a Facebook account for them.

MySpace has some drinking buddies and kids I knew from high school/college. Leaving it behind wasn't a big deal.

Facebook has *everyone* I know. My parents, my siblings, my cousins, my coworkers, my classmates, anything you can think of - it's on Facebook. It will be very hard for someone else to come along and compete with that. I *hate* Facebook, but any new social network might have a better interface or better privacy settings or whatever, but it won't have everyone I know.

Re:$50 billion for Facebook?

[GameboyRMH]

Before MySpace they were on GeoCities and AngelFire. But back then we called them "personal web sites."

Re:$50 billion for Facebook?

[toddestan]

Somehow, I don't think Paypal would make a good social networking site.

Re:$50 billion for Facebook?

[MrEricSir]

Oops! Yes, you're right -- $100 per user. That's 10x as absurd!

Re:$50 billion for Facebook?

[tehcyder]

Facebook claims they have 500 million users. That's $10 per user.

If I paid you $10, would you sign up for my new social networking site? We could do away with Facebook.

I'm not sure you've quite got he hang of how to value a company as (a) it would have to be £100 and (b) people are supposed to pay you, not vice versa.
But I do applaud your intention.

Re:$50 billion for Facebook?

[tehcyder]

Hell, I'd sign up at least several thousand times!!!

can I friend you? I've got a great bridge in Brooklyn for sale.

Re:First post

[phantomfive]

Not really, it's a good thing.....it forced IBM to reconsider their place in the world, and start a new direction. Their new direction fortunately included open source. IBM spent a lot of money on Linux and other such products, which they likely wouldn't have if OS/2 had taken off.

Oh us too?

[JoeThoughtful]

Now IBM can afford by buy back OS/2 and make a smartphone version that features Watson running on CIGS solar cells.

Paul Thurrott weighs in

[Anonymous Coward]

Longtime Microsoft watcher Paul Thurrott just blogged his ideas for fixing Microsoft and getting it back into the game against Apple, Google, and Facebook. Start by spinning off Xbox, he opines. Then delayer the idea-killing corporate bureaucracy, starting with Ballmer...

Re:Paul Thurrott weighs in

[Lennie]

Why would anyone wanna fix Microsoft ?

Re:Paul Thurrott weighs in

[antifoidulus]

Yeah, I am still shocked that Microsoft shareholders have not revolted against Ballmer. The man has shown he has 0 technological vision and about as much business acumen it seems. Microsoft as of late has been a pretty directionless company. It has no idea about "where it wants to go today", let alone tomorrow. Ballmer is good at only one thing, pulling childish pranks, but I can go to any university in the country and find a frat boy who would be more than willing and able to do that at 1% of Ballmer's salary.

Ballmer's only "talent" was being at the right place at the right time. He may have been able to help Microsoft out a bit when it was first getting started, but the man has shown 0 interest in learning anything about technology, what it can do, and where it will go. If Microsoft wants to survive against companies whose leaders actually give 2 shits about technology then they better give Ballmer the boot and fast.

Re:Paul Thurrott weighs in

[antifoidulus]

What "success"? Microsoft has failed at almost every new market it has even attempted to enter into, they are one of the few US based tech companies whose stock price has been falling the past couple years. Windows market share is at an all time low, Windows server is falling even faster. All of this in a couple years time, all of this since Gates retired and Ballmer was put in place. But yeah, I guess all of those facts are just my "naively simplistic and emotional view". Face it, Ballmer is a failure and that's all there is to it. He has no interest in technology, he cannot even control his own staff.

Re:Paul Thurrott weighs in

[MrHanky]

Fix as in neuter, I suppose.

Re:Paul Thurrott weighs in

[gbjbaanb]

there's 2 things to this that will make you realise why Ballmer hasn't gone despite being so f**** useless.

1. He and his buddy Bill Gates own about 10% of the total shares in MS. (or that might be 10% each, I forget and don't care too much anyway)

2. He has controlled his staff - though Scott Guthrie left of his own accord, Bob Muglia was told to pack his bags, basically for being too good (he took the services and tools division from nothing to be the 3rd biggest revenue stream at MS). So obviously if you do well at MS, you can expect to be sacked by Ballmer, to stop anyone from remaining who could take his job over.

All in all, there would have to be an almighty cock-up to get rid of him. Like, say another vastly overpaid acquisition. There are 8.5b reasons why he should go today, but.. guess what BillG steps in and says the takeover of Skype was all his idea. Thus Stevey gets to live another day, 'cos no-one on the board will complain if Billy says it was his idea.

The good news to the rest of us is, if Ballmer goes get the heave, the only guy who is likely to take over is Kevin Turner - the accountant chap. If he gets in, he will have to cut costs and scrap the money-pit parts of the business, so Bing, online services, mobile and all the myriad other money-losers will be spun off or just scrapped. This can only be a good thing for the rest of the industry!

Re:Paul Thurrott weighs in

[Patch86]

All in all, there would have to be an almighty cock-up to get rid of him. Like, say another vastly overpaid acquisition. There are 8.5b reasons why he should go today, but.. guess what BillG steps in and says the takeover of Skype was all his idea.

Aside from the Skype acquisition, Ballmer has also presided over Vista, the repeated failure of MSN Search/Windows Live Search to gain any market share (Bing is doing better, but is still an extremely distant follower of Google), the Zune media player (about 2% market share, last I heard), the Kin phones (hohoho), being generally wrong-footed once again with Tablet PCs, losing the "biggest tech company" title (to Apple, of all people)...

I know Bill has to take some of the blame for the earlier ones, but Steve has been CEO for a long while now. I don't want to rag on MS too hard (I'm not really a knee-jerk MS hater) but they've had so many headline-grabbing cock-ups in the last decade, I honestly can't imagine what CEO in any other company would have expected to have survived. If the shareholders haven't shifted him after all that, I don't think they ever will.

Re:Paul Thurrott weighs in

[UnknowingFool]

Under the metric of share price which is the only metric shareholders care about, MS and Ballmer fail. Shareholders do not care really if Ballmer can play seven different instruments while juggling. Under his tenure at MS, they have not grown much. Why hasn't he been replaced is a valid question.

Re:Paul Thurrott weighs in

[gbjbaanb]

My comment wasn't a general BillG bashing.. he really did say that he gave the go-ahead to the board to takeover Skype. Where's the quote....

"I was a strong proponent at the board level for the deal being done I think it's a great, great deal for Skype ... I think its a great deal for Microsoft."

"The idea of video conferencing is going to get so much better than it is today. Skype actually does get a fair bit of revenue" said Mr Gates.

"It'll be fascinating to see how the brilliant ideas out of Microsoft research, coming together with Skype, what they can make of that"

so there you go - that's the best bit of business analysis I've ever heard, forget build v buy costs, or synergy acquisition savings, or even purchasing unique innovation. Instead we get some vague umm and ahh noises. Oh, revenue at Skype was effectively "sod all" to use the financial terminology. Certainly it just about broke even after the cost of running the show was taken into account.

Now, if you really want a laugh, try this: a list of Microsoft's best, or actually worst, acquisitions.. such as aQuantive.

Re:Paul Thurrott weighs in

[shutdown -p now]

Scott Guthrie left of his own accord

Scott didn't leave, he changed teams.

Re:Paul Thurrott weighs in

[GameboyRMH]

the Zune media player (about 2% market share

HAH, that's outrageously optimistic.

Re:Paul Thurrott weighs in

[drinkypoo]

What "success"? Microsoft has failed at almost every new market it has even attempted to enter into

They have successfully got their foot into the entertainment market and this last year was their first profitable one in that division. Looks like their strategy of learning all they could from Sega before Sony killed them paid off.

Re:Paul Thurrott weighs in

[tehcyder]

(I'm not really a knee-jerk MS hater)

Who the fuck let you in then? Call security!

Negligible revenue

[Arancaytar]

valued in the private market for as much as $50 billion, on negligible revenue

1995 called; they want their bubble back.

Re:Negligible revenue

[fragfoo]

valued in the private market for as much as $50 billion, on negligible revenue

1995 called; they want their bubble back.

Slight sign that we are in the presence of another bubble: LinkedIn beeing valued $9 billion.

Re:Negligible revenue

[geekoid]

Except Linked in has revenue and a pretty solid plan.

Maybe it's the fact that most people here have no idea about the financial market?

Re:Negligible revenue

[tehcyder]

Except Linked in has revenue and a pretty solid plan.

Maybe it's the fact that most people here have no idea about the financial market?

Well OK, how much revenue, how much expected revenue, and what is the basis of their plan? You will have to excuse the rest of us for not having detailed financial about companies we have no interest in.

Re:Negligible revenue

[fragfoo]

Except Linked in has revenue and a pretty solid plan.

Maybe it's the fact that most people here have no idea about the financial market?

Well OK, how much revenue, how much expected revenue, and what is the basis of their plan? You will have to excuse the rest of us for not having detailed financial about companies we have no interest in.

Quoting a washington post blog : "LinkedIn made $94 million in the first quarter of 2011, and its net income was $15.4 million in 2010"

No doubt all the OS/2 users...

[avatar139]

...who seem to be omnipresent on /. will be thrilled at this news!

[DucksFlyingChair] To be fair though, I suspect it's more due to Ballmer's incompetence than any real indication of success on IBM's part! [/DucksFlyingChair] ;)

Re:First post

[improfane]

I think IBM software is generally crappy and rushed, look at Lotus Notes. How can anyone pay for that monstrosity? Hardware, that's a different story.

I think IBM has a ridiculously large sales and marketing department so they can trick IT managers into getting insane contracts and deals. They do produce nice guides on developer works though.

It's all funny money.

[VortexCortex]

There is a bit of belly button lint that is valued at over $900 nonillion dollars! That's more money than there is in the world, many times over! I would say her naval lint is priceless, but I may consider letting someone else farm my girlfriend's belly button, If they transfered the world's wealth to me, many times over (to have destroyed -- that shit's evil, and the world would just make more money).

Remember when Yahoo's stock value jumped because MS tried to buy them? Did you notice how much better Yahoo's service was during this time? Remember how their stock price fell drastically after the MS buy-out fell through? Remember how Yahoo's service just turned to utter shit at the same time? No? Right, because it stayed the same. These companies stock prices and Market Caps mean jack shit... it's all decimal numbers attached to feelings -- if more people feel good about having a larger number of a company's stock, then it's "worth" more, irregardless of the actual value of the products and services the companies make... It's all based on emotions! Feelings!!!

Now, say you're AT&T. Your stock price is worth X because of your profit and loss statement. If you spend some profit to make your company worth more -- improved speeds and reliability -- then your stock price will fall because the investors see that you are not bringing in as much profit.

Yes yes, there are Analysts, this is an over-simplification, the actual value does weigh in somewhat, but the feelings do more so -- This really does hold true in most cases. Ergo, one reason the US has shitty Internet is because of the funny-money market.

Granted, I feel that MS should be worth less than IBM, even though I haven't seen a single IBM brand device anywhere in my house for years... Even though I don't like or own Apple products, I feel that they should be worth more than MS because their fanbois are loud.

Is it any wonder that the feeling based values relate directly to the public's feelings and thus directly are reflected in the stock market?

How are you feeling about the banking/mortgage industry? About as well as they are doing, eh? Wonder why that is... It's a shame we didn't learn our lesson about the funny-money market the first time... I once showed that my neighbor has spent enough money playing the lottery to have purchased things they talk about buying if they win -- C'est la vie, people are dumb.

Re:It's all funny money.

[JAlexoi]

Here are some hints. There's a TLA corp behind the scenes when :
- you swipe your CC at a store
- you reserve/buy an airline ticket (online or at the travel agent's)
- you look at a lot of airport departure boards
- you check in your baggage
- you wait for the traffic light(in densely populated areas)
- you turn on your XBox360, PlayStation or Nintendo console
- you do the most mundane things that you don't even think about

Re:It's all funny money.

[Confusador]

It's as if they finally remembered that their name is International Business Machines!

Re:It's all funny money.

[Kjella]

Would you consider your car's value in the second hand market to be "funny money"? That when suddenly our big SUV is a huge "gas guzzler" and everybody wants tiny hybrids instead that didn't change the value of your car even though it's the same? In case you didn't notice, the market is mostly driven what people want. To want is an emotion. Secondly they buy for the future, like how they think the oil prices will develop. That is belief. If sales are driven by emotions and beliefs, why would not stock prices?

Market value is driven by what's in the market, there is no sale without a buyer so if more people want to sell than buy the only way the market comes in balance is if the prices drop so horribly some no longer want to sell. If 100.000 people want to sell their SUV and 1.000 want to buy one they'll push prices until 90.000 sellers have dropped out and 9.000 more wanted in on the fire sale. You can think the market has gone crazy and that the worth is much higher but it's not a price you can get in the market.

Likewise if supply is limited, say you promised your kids a [console] for Christmas and it's sold out there'll be a booming market on eBay at way above retail until enough buyers drop out and delay their purchase. Is that profit funny money too? Stocks are like this, I can't get in on something unless I pay enough to make you sell. I can't get out unless I lower price enough to make you buy. It's only "potential" money like if you owned an SUV or [console], but it'd be pretty real if you wanted to or had to sell.

Re:It's all funny money.

[catchblue22]

For a very well put together documentary on the irrational nature of economic value, watch this Nova episode, "Mind Over Money". (sorry, US only...otherwise try bittorrent)

One of the funniest moments in the documentary occurs when otherwise intelligent economics students are caused to pay $28 for a twenty dollar bill. The experiment works by causing the losing bidder to forfeit his bid, not unlike the way real markets behave. The dominant economic models today assume that the consumer will rationally act to maximize his wealth (or act as if he is). Clearly the existence of bubbles such as the recent real estate bubble contradict this.

I asked an MBA friend about how someone could pay $28 for a twenty dollar bill. His response was that value was what was defined by the consumer, and that maybe that twenty dollar bill was actually worth $28 to the buyer. However there are some very deep flaws in this argument. If we assume that the price a consumer pays is ALWAYS the right price by definition, then the consumer can never be wrong. When Dutch people in the 1600's bought single tulip bulbs for the price of a house, those prices were rational under this assumption. Assuming that the price a consumer pays is always correct puts the assumption of market rationality beyond falsification. This is textbook circular reasoning. No wonder economics has often been called "the Dismal Science".

Re:It's all funny money.

[timeOday]

For a very well put together documentary on the irrational nature of economic value, watch this Nova episode, "Mind Over Money"

Sweet, it's on Netflix Watch Instantly, too.

Re:It's all funny money.

[GameboyRMH]

Assuming that the price a consumer pays is always correct puts the assumption of market rationality beyond falsification.

This is also the argument libertarians use to claim that there is no such thing as overpricing - if you paid $x for something, then it's obviously worth $x to you and you happily consented to the transaction.

Re:It's all funny money.

[yuhong]

Ergo, one reason the US has shitty Internet is because of the funny-money market.

Any idea how to fix this one? I bet the legacy MBA CEOs and the board of directors who hires them don't help either.

Re:First post

[Hamsterdan]

MacOS 7.x to 9.x was *not* superior to NT. Macs didn't offer multitasking, memory protection and modern stuff until OS X. Better than 3.x, on some points, but not NT (or even 9x)...

Re:Name for DotCom bubble 2.0?

[Lennie]

How about 'Social Bubble', it sounds friendly too :-)

Quality v. Content

[JJJJust]

Graphics aside, it's no secret that there's been a big change from a mantra of "quality, quality, quality" to "content, content, content"... and non-related content at that. A PlayStation did one thing - it played video games. The PS3 can do nearly everything... even function as a computer if you don't upgrade the firmware.

In prior years, it would take you at LEAST a week to finish a campaign on any respectable video game. These days, you can finish a video game completely in two days. Then spend five more days fiddling with the "bonus content". If they spent more time developing a good story as opposed to unlockables, that race may accelerate again. Developers aren't struggling to use the processing power they have at their disposal. There's no reason for innovation at this particular time.

We need to get back to a time where developing solid and expansive CORE content -- not extras -- was what mattered.

Re:Quality v. Content

[maxwell demon]

I think you posted to the wrong story. Did you actually want to post to that one?

Re:Quality v. Content

[ls671]

Believe it or not, it happened to me a couple times that my post ended up in the wrong story although I indeed posted to the right story. This could be slashcode. I even posted a screen shot of this here at some point.

Re:First post

[IrquiM]

If you use Lotus Notes the way it should be used, it's far superior to Outlook and Sharepoint alternatives. As just an e-mail client - sure, outlook is probably better.

Re:First, there were farmers

[maxwell demon]

If you've got the modern economy figured out, feel free to respond.

It's actually quite easy: The modern economy is a big game, and the score is measured in dollars. Anything else doesn't matter. Unemployed people only matter as far as they are a cost factor. As long as the extra win is larger than the extra cost they cause, they are acceptable. Oh, someone starves from our decisions? Does it cost us something? No? Well, then, don't worry. Our score is not affected. What, morality? Oh, I guess we can make a nice campaign from it. Good for our score. What, we should follow moral rules? That would harm our score! Impossible! No, moral rules are only to be used against others, to reduce their score!

Back in the old days...

[trawg]

I remember when I was a retail software sales goon, going to an IBM presentation for their voice recognition software back in 1995. At the time there was a lot of big Windows 95 stuff going on and the IBM guy was really keen to make sure that people knew IBM was a "real" computer company, and one thing that has always stuck with me was him saying that IBM was the biggest company in that market, and if was so big that if you took the next three companies and added their value together - IBM was still worth more.

Never found out of that was exactly true, but at the time I remember it put IBM in a new perspective for me - I just knew them as a company that made a bunch of weeny boring unpopular PC software packages and did some stuff in the hardware space. The reality seems to be that they're this big, massively entrenched company that has hooks freakin' everywhere.

Re:Back in the old days...

[JAlexoi]

I believe that in a case of real national emergency in US, something cataclysmic, for the US gov't to continue to function the company they would save is IBM. I mean, they are so heavily entrenched in everything. If anything, IBM could be the predecessor of Umbrella Corporation.

Re:Back in the old days...

[geekoid]

IBM practically has patents on one's and zeros.

Re:Back in the old days...

[tehcyder]

I remember when I was a retail software sales goon, going to an IBM presentation for their voice recognition software back in 1995. At the time there was a lot of big Windows 95 stuff going on and the IBM guy was really keen to make sure that people knew IBM was a "real" computer company, and one thing that has always stuck with me was him saying that IBM was the biggest company in that market, and if was so big that if you took the next three companies and added their value together - IBM was still worth more.

Never found out of that was exactly true, but at the time I remember it put IBM in a new perspective for me - I just knew them as a company that made a bunch of weeny boring unpopular PC software packages and did some stuff in the hardware space. The reality seems to be that they're this big, massively entrenched company that has hooks freakin' everywhere.

So, to paraphrases, someone once told you something about another thing, which you didn't bother checking.

Re:Back in the old days...

[trawg]

Yeh, more like an official IBM public liaison got up in front of a lecture hall full of media, software partners, and retailers, and made the claim at a big launch of a new revision of a major software product they'd spent a wee bit of time and effort on. This wasn't some guy in a pub.

I didn't have a lot of reason to doubt it and still don't - it just made me start paying attention to that little three letter logo and noticing in how many places it was actually visible once you started looking.

Re: IBM Now Officially Worth More Than Microsoft

[hcs_$reboot]

IBM Now Officially Worth More Than Microsoft

Wasn't that true all the time?
Oh, we are talking about money...

Do you have to be REALLY old...

[Archtech]

... to read the headline as "...IBM's market cap has once again surpassed Microsoft's..."?

Don't forget that IBM was a $70 billion turnover company (back when that was worth quite a lot) whose chairman regularly appeared at the shareholders' meeting and apologized for any inadvertent growth during the past year? That was because everyone knew if IBM grew any bigger the DoJ was committed to dismembering it as a monopoly.

At that point, there was no Microsoft.

IBM basically created Microsoft as a defence against the mortal strategic threat posed to it by the Apple Lisa. Yes, that's right: to protect itself against an utterly imaginary threat, IBM itself created the only serious competitor it would have for the next 30 years. Hmmm, maybe not as dumb as you might think... at least it got the DoJ off its back and onto Microsoft's...

Re:Do you have to be REALLY old...

[FatSean]

IBM created Microsoft? Ha! I guess you don't know many IBMers from back in the day.

Re:Do you have to be REALLY old...

[swillden]

IBM created Microsoft? Ha! I guess you don't know many IBMers from back in the day.

Yes, IBM created Microsoft. Had IBM opted to write its own operating system for the PC, or even just bought MS-DOS outright rather than licensing it, Microsoft would never have existed (the company would have, but it would never have grown the way it did).

And, yes, I know IBMers from back in the day. I didn't become an IBMer until 1997 so I wasn't there personally, but over 14 years in the company I've met plenty who were.

Re:Do you have to be REALLY old...

[yuhong]

Yea, they were considering CP/M-86 from Digital Research (the creator of CP/M), but I think they failed at business negotiations with them.

Re:Do you have to be REALLY old...

[ron_ivi]

IBM created Microsoft because their CEO John Akers (on the board of United Way) was friends with Bill Gates's mom (chairwoman of United Way).

That's the year before Microsoft was even incorporated as a company called microsoft with Bill G as CEO.

Re:Do you have to be REALLY old...

[ron_ivi]

What Microsoft had that Digital Research didn't was a mom who was friends with IBM's CEO. (Akers and BillG's mom were both on the board of United Way).

Re:Do you have to be REALLY old...

[Archtech]

Fwiw I was actively engaged in the computer industry at the time of those events, and then I earned a decent living writing about them for another 20 years or so. So I do know the facts reasonably well.

IBM contracted Microsoft to help build OS/2.

Wrong. IBM first contracted Microsoft to provide the original operating system for the IBM PC - which turned out to be MS-DOS. OS/2 came later; as its name suggests, it was meant to be the second (and much better) PC operating system.

From there Gates did his thing and used the tech from the OS/2 project to build NT.

Also wrong. The ideas which Microsoft got from OS/2, together with some other GUI ideas from Apple, went into the first versions of Windows in the later 1980s. The first two or three versions of Windows didn't really work at all. Windows 3 was the first one was that was useable. Windows NT was a fairly successful blending of the Windows GUI with underlying operating system software that was remarkably similar to VMS. Unsurprising, because it was managed by David Cutler and his crew whom Microsoft hired when they became discontented at DEC.

But Apple has never been in the same Arena as IBM and has never shown signs that they ever intend to.

Which was precisely the point I made by saying the perceived threat from Apple was an "utterly imaginary" one.

Re:Do you have to be REALLY old...

[bws111]

Eh? Frank Cary was the CEO of IBM during the initial development of the PC (1980), and John Opel was the CEO for it's release (1981). John Akers was not CEO until 1985.

Re:Do you have to be REALLY old...

[Archtech]

You're getting senile. The Apple Lisa was never a threat to IBM or anyone.

Yes, that is what I said. Are you one of those people who don't understand irony?

Re:Do you have to be REALLY old...

[ron_ivi]

Duh - copy&paste error. Opel.

Thanks for the correction.

Re: IBM Now Officially Worth More Than Microsoft

[JAlexoi]

No... Stock price is not money, it's perception.

Re:First post

[the linux geek]

OS/2 was a miniscule part of IBM's total strategy. IBM plays in high-end UNIX servers, mainframes, software, and services (maintenance, outsourcing, support.) This is big money, despite being largely invisible to consumers.

Facebook?

[Burnhard]

Yes. It was valued at $50 billion by Goldman Sachs and as we know Goldman Sachs are experts at running little pump & dump schemes. Coincidentally, Goldman are managing the floatation. What a shock their valuation was!

Official?

[wellwellwelloh]

Official? Who declared it official? Since when have market valuations been "official"?

IBM has always been worth more than microsoft.

[Anonymous Coward]

Always. They have the worlds largest patent portfolio. They own a good chunk of modern computing in one way or another.

Oh you mean as valued by the fake made up market stats they are now valued more? Big deal... Those numbers don't mean shit.

Re:First post

[Nursie]

I find it hard to believe it's superior to anything, ever.

It's slow, heavyweight and awkward, at everything it does. As a client it's far, far too thick. It pains me to say it but the modern world of browser-based applications, Lotus Notes is a dinosaur. And not a cool one like a raptor.

After IBM sold off ...

[geekthecat]

IBM sold off all of these components and its still biger than microsoft Hard drive division Printer division. Embedded division Federal division Personal computer division Network division Slashdot need to use IBM's POWER servers so they will stop getting slashdoted... POWER servers can process at least 3 times the amount of information as any intel server. All of those cell towers across the country, they have PowerPC in them. All the routers sifting through your communications, they have PowerPC in them. All the military weapons, yes PowerPC. why buy three INTEL servers, when i can buy just one POWER7 server. If you need masive amounts of processing power, you'll use POWER/PowerPC {xBox360/Play stations 3/Wii}

Re:First post

[1u3hr]

MacOS 7.x to 9.x was *not* superior to NT.

Possibly, in features and power, not in usability. In any case, NT was pretty much only used on servers and hardcore geeks, not average desktops. (And I use Win2k, which is just an upgrade of NT, so I like it myself.)

Re:First post

[Anonymous Coward]

Lotus Notes as an email client has it's quirks, but has traditionally been hated because it works differently to Outlook.

Now imagine if I fork Apache, tightly integrate a NoSQL database, add a powerful ACL framework, and integrate a server-side scripting engine. Cool tech project for 2011? No... Lotus Domino circa 1996.

What Wolfram|Alfa says about those companies

[Anonymous Coward]

It's quite interesting to compare other numbers, Wolfram qives a quick glimpse - http://www.wolframalpha.com/input/?i=apple+ibm+microsoft+google+

I think the most interesting is that the market capitalization isn't correlated with the net revenue of the company - where logically it should be. This may be because of the expectations about a company future earnings, and higher capitalization is a bubble created by investors believing that given company will earn more in future. If this is true, then Apple is now very overpriced, as it's worth 300b with net income 20b. The IBM and Microsoft are worth about 200b, but IBM has net income 15b, and Microsoft 20b - I think this reflects investors' beliefs/analyses about the future growth of the companies.

This thoughts may be very trivial to someone with economic backround, but I'm just a computer science student, and it's interesting for me (and I suppose it may be to others without such background) to analyse market indexes about tech companies that way.

Another thing that I've just 'discovered' is that the 'P/E rato' row on the Wolfram table means the market capitalization divided by annual net income - so this number reflects how many years investors would have to wait until the company would pay back what it's currently worth. E.g. in case of Apple P/E is 15, so if you buy a share worth 15$, then you could get 1$ per year max (in case where company pays all net income to market owners, instead of e.g. more investments).

I'm wondering what more those inices can tell about the expected future of companies. For example, if the P/E index is twice higher for Google than for Microsoft, does it mean that market believes (or analyses shows) Google's net revenue will grow twice faster than Microsoft's? If so, are we able to tell how many year have to pass for the Google to surpass Microsoft in net revenue/ market cap.

Wow, amazing...

[HerculesMO]

A company who makes billions in hardware devices and the supporting facilities now is worth more than just a software company.

News at 11.

Re:Wow, amazing...

[tehcyder]

A company who makes billions in hardware devices and the supporting facilities now is worth more than just a software company.

News at 11.

There's nothing magically superior about selling hardware and support compared with selling software, unless you believe that all software should be free and therefore of no monetary value. Otherwise, they're all just product.

Re:First post

[MrHanky]

Untrue. The technical inferiority of classic MacOS was a real, quantifiable usability problem at times, and the UI never really was all that much better than the one found in Windows 95. Hell, even Steve Jobs knew it had to be replaced.

Re:First post

[MarkRose]

Macs offered multitasking since 1987, with the introduction of MultiFinder. You are correct about memory protection though.

I'd have to say 7 was superior to NT 3.5, but once 4.0 came out, NT/2k lead the way until OS X.

LOL WAT?

[FatSean]

The government is going to bail out facebook? Me thinks we've got someone upset with recent elections who wants to inject his anti-government rants into this thread. Government does need some fixing...better regulation of financial markets for one. But your screed comes across as someone who wants to tear it all down.

Re:First post

[gbjbaanb]

the overlap - I read about guys from IBM's consulting arm talking about Microsoft consulting. They said if they and guys from MS ever turned up to the same meeting, they knew one of them had come to the wrong place.

The implication was that IBM only does the biggest customers that Microsoft simply can't handle. It makes sense to me, IBM was repositioned as a serious business consultancy, Microsoft is just a 2-bit technology player (and that technology is 20 years old)

Not max $1

[alexander_686]

P/E is a backwards number. In your example, Apple earned $1 last year - but that is not what it's going to earn next year.

P/E is a way to compare two different companies quickly. For example, a company with 1,000 shares at $10 to a company with 100 share at $100 that made the same profit would have the same P/E ratio. One can compare Berkshire Hathaway ($118,045 per share) with Microsoft ($24).

A better example may be to compare IBM, Google and Ford to get a better idea of how these things work. In some ways, Ford is a larger company. More employees, more revenue, etc. then the 4 companies you just gave. On the other hand, Ford's profit margin and it's expectation for growth is larger. So Ford's P/E is 8. People are putting a higher value on last year's earnings for MSFT then for Ford.

So, why is this? 2 big reasons.

First, future growth. By the way, this does not mean people think Google is going to grow 2x faster then MSFT. The growth curve of most companies are exponential [very fast growth] which then levels off.

Second is risk/uncertainty The riskier a company is the lower it's P/E ratio.

I hope this helps.

And to answer your last question

Re: IBM Now Officially Worth More Than Microsoft

[glwtta]

No... Stock price is not money, it's perception.

And perception is money.

His story

[paiute]

Waiting in the wings is Facebook, which has been valued in the private market for as much as $50 billion, on negligible revenue

Gee, where have I heard that one before? I forget. Nevermind. BUY BUY BUY!!!

mac multitasking

[FeriteCore]

If I remember correctly, it was cooperative, not preemptive, multitasking. When things were going well you wouldn't notice the difference. Much less effective when dealing with a non-cooperating task.

Earlier versions of Windows may have been similar.

Re:First, there were farmers

[Compaqt]

Wow, someone actually modded my post to 0? What, was it a Facebook fanboi?

Re:First post

[vbraga]

He's talking about preemptive multitasking which Macs didn't offer.

So in other words

[p51d007]

Back in the 80's, Bill Gates & company said IBM was too much "suits", and didn't know what the customers wanted, or how to deliver it. Kind of looks like MS has done the same thing, sit back and just let Windows run the roost, and now they are behind the times. Tablet computing, MS doesn't have a clue. Phones, MS doesn't have a clue. Windows, or more importantly, the home bound PC, is on its way out and MS is about 5 years behind the times.

Re:So in other words

[Shotgun]

Microsoft has always been behind the times. Windows was chasing after Apple's GUI. They barely missed being run over by the Internet (anyone remember having to install Trumpet WinSocks to get a TCP/IP stack?), and all their consumer products have been poor hacks of other successful products that have offered neither innovation nor redeeming value until they've been marked down to the bargain bin (This includes the Xbox which was in the bargain bin to begin with. MS sold them at a loss to try to gain market share.)

Re:First post

[opus_magnum]

WTF does this have to do with Microsoft or IBM?

Re:First post

[dougmc]

OS/2 2.0 offered all these "modern things" you're talking about back when Windows 3.0 was the newest that Microsoft had out, and MacOS was far behind as well.

Re:Name for DotCom bubble 2.0?

[larry bagina]

I'm sure most of us have cut a fart while sitting in a pool or a hot tub or a bath. Urban dictionary calls it an aqua fart, though I've never heard it called anything. Anyhow, when you do it in a hot tub, the heat and chlorine and ass gas combine to form a truly retched stench that lingers.

That's the face book bubble.

Maybe I missed it

[FluiDynamics]

- who is the #1 tech company?

Re:Maybe I missed it

[FluiDynamics]

Oh Apple I see...

Re:Maybe I missed it

[FluiDynamics]

Interesting since their stock value and basically the "value" of the company doesn't match their books: "The companies have comparable revenue, with Microsoft at $58.4 billion and Apple at $42.9 billion. But in their most recent fiscal years, Apple had net income of $5.7 billion, while Microsoft earned $14.6 billion. Microsoft has more cash and short-term investments, $39.7 billion, to Apple’s $23.1 billion, which makes the value assigned by the market to Apple, essentially a bet on its future prospects, all the more remarkable." http://www.nytimes.com/2010/05/27/technology/27apple.html Apple certainly does have the coolness factor as of late... I guess that makes up the difference. :)

Re:Maybe I missed it

[UnknowingFool]

Last year Apple surpassed MS in revenue but not net income. This year they passed MS in net income. MS still has more cash than Apple at the moment; I am not sure about the details of the Skype acquisition. If it involves cash, then MS will have less cash than Apple if the deal goes through.

Re:Maybe I missed it

[CheerfulMacFanboy]

Interesting since their stock value and basically the "value" of the company doesn't match their books: "The companies have comparable revenue, with Microsoft at $58.4 billion and Apple at $42.9 billion. But in their most recent fiscal years, Apple had net income of $5.7 billion, while Microsoft earned $14.6 billion. Microsoft has more cash and short-term investments, $39.7 billion, to Apple’s $23.1 billion, which makes the value assigned by the market to Apple, essentially a bet on its future prospects, all the more remarkable." http://www.nytimes.com/2010/05/27/technology/27apple.html Apple certainly does have the coolness factor as of late... I guess that makes up the difference. :)

Quoting numbers not one year out of date would make up much more of a difference. Gee, I wonder if you did that on purpose...

Re:First post

[dougmc]

Correction ... Windows 3.1 came out at the same time as OS/2 2.0.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:First post

[CheerfulMacFanboy]

He's talking about preemptive multitasking which Macs didn't offer.

A/UX. Way before NT.

Re:First post

[Osgeld]

um no not even close, you have not used mac os 1-9 recently have you? I have a SE with 7 on it and yea its so much better, lets say I want to open some stuffit files

open hard drive
open folder
open folder
open app
go to finder
close the 4 windows I have open cause now finder is sucking down 2/3rds of my memory
go back to the switcher find my app, did it pop up? i cant tell the damn taskbar looks the same, ok yes it did now maybe I can fucking unstuff these 5 things
shit I cant select multiple files got to do each one manually, and they are double stuffed so 10x the clicks
close stuffit
spend 5 min rearranging icons on desktop cause mac just vomits them anywhere and if you tell it to clean up it just snaps to a grid

yea that much better than the windows 3.11 version, run winzip select files hit 3 buttons and move on with life

Re:First post

[1u3hr]

The technical inferiority of classic MacOS was a real, quantifiable usability problem at times

You're obviously nostalgic for a classic 20th century Mac vs Windows flame war. Well I'm not. I used and supported both back in the day. I know what I know, and I disagree, and am not going to waste more time arguing about the merits of dead OSes.

Re:First post

[Osgeld]

Multifinder was just a task switcher, you could find those for any platform and it was inspired by a pc program during a magazine interview

Oligopolies

[Tablizer]

The government wouldn't need to bail out companies if oligopolies were not permitted. Oligopolies are anti-competition, and create town- and state-level dependencies.

The excuses to allow oligopolies are usually weak.
 

Re:Oligopolies

[tehcyder]

The government wouldn't need to bail out companies if oligopolies were not permitted. Oligopolies are anti-competition, and create town- and state-level dependencies.

The excuses to allow oligopolies are usually weak.

The thing is, you need laws to prevent oligopolies, same as monopolies: and those laws are government interference in the blessed free market, according to the insane right wing belief system of many in the US (and increasingly, here in the UK).

Long live Microsoft

[nurb432]

ummm nah... let them burn...

Re:Here's some bitcoin reasoning

[GameboyRMH]

I don't get the "don't support 20-something billionaires" attitude. I don't want to support Zuckerberg because he's an awful douche destroying mankind's concept of privacy for profit, and it wouldn't make a difference to me if he was 20 or 50.

Re:Apple?

[CheerfulMacFanboy]

Wut? Why and since when is Apple first? The only thing they make that's popular is the iPhone (and nowadays to a lesser extent, the iPod), no?

What Apple makes? How about 55% of the profits of the world mobile phone market? And that is just 50% of their profits. IOW their "unimportant" business makes more profit than all other mobile phone companies combined.

Ohh, you mean products? The best selling tablet? Computers with sales increases that outperformed the rest of the industry for a couple of years now?

Re:First post

[Sylak]

Correction: System 7 introduced free multitasking on the Macintosh OS, which had previously needed Multifinder to do. (although GP was talking about AppleOS which is a different beast entirely)

math fail

[asn]

500 million users * $10 per user = $5 billion...

Present value of future free cash flows

[sjbe]

The "proper" value of a stock is the net present value of its future dividend stream.

If by "future dividend stream" you mean free cash flow then you are quite correct.

You mean

[geekoid]

IBM is once again, Officially Worth More Than Microsoft.

Balmer is killing MS, and it's because he is too busy chasing shinys.

Re:You mean

[jpenguin]

Big blue is back... When is OS/2 going to beat Windows?

Re:First post

[drinkypoo]

Notes is a dogs breakfast of utter shyte with exotic commands to do what should be simple functions.

While this is true, it doesn't contradict anything he said.

Re:Name for DotCom bubble 2.0?

[drinkypoo]

Why does it still smell worse than a normal fart when there's no chlorine involved? I shower in well water with multiple filters including multiple carbon filters (we live in an Ag region so I want to be sure to capture anything nasty that has run off and ended up in my ground water) so there's no chlorine to begin with and then there's REALLY no chlorine, but a fart in the shower still smells worse than a fart somewhere else.

Re:First post

[drinkypoo]

A/UX was never well supported and anyone who used it was a tool because all the alternatives were superior in every way except they didn't wear an Apple logo. In any case, the argument was actually that MacOS didn't offer it, and it's true. No memory protection until what, OS9? Even though tons of macs had MMUs that you paid for but never got to use... except for virtual memory, which would actually decrease the stability of the system (at least in System 7 and 8, I didn't mess with 9 much, by then I had got well over that nonsense.)

Re:First post

[toddestan]

A/UX. Way before NT.

Xenix. Way before A/UX.

Re:First post

[symbolset]

It was an important part of their PC plans. Counting on Microsoft to help them develop the thing was a serious strategic error.

Re:First post

[1u3hr]

lets say I want to open some stuffit files...

You're comparing Stuffit and Winzip. Those are apps, not OS components. And Stuffit is a proprietary format, so there wasn't an alternative (that I recall). I'm sure you could find some annoying Windows archivers.

I used ZipIt on Mac, seemed pretty simple.

Re:First post

[jonadab]

All the usability in the universe isn't particularly meaningful without memory protection and preemptive multitasking, unless you are *extremely* picky about what software you run (or unless you only ever want to run one program at a time per computer, in which case you scarcely even need an OS).

I worked with various versions (6, 7, 8, 9) of the classic MacOS on a number of occasions in a variety of settings (starting before I ever saw Windows) on various hardware. It was a painful and frustrating experience every single time, because the mean time between lockups was so excruciatingly low as to make it virtually impossible to ever actually get anything meaningful accomplished. If anything it may have even been worse than Windows 3.x (which would really be going some, because Windows 3.x was about as stable as a three-legged elephant on roller skates).

Investors should realize that

[jawahar]

consumerism != capitalism

Re:First post

[WorBlux]

nor domesticated animals..

None of the animals of Africa are particularly domesticable, and the domestication of animals seems to be one of the lynch-pins needed for civilization

Re:Name for DotCom bubble 2.0?

[oztiks]

Facebook, damn that was sooo 2011! The "hard on" the Social Network movie has given the geek world today will eventually go limp. I'd say around the time MS does what it does best. Fuck all their partners when they least expect it, steal a sizable marketshare and borgify the general population.

They sink 240 mil into FB (salting its company value) and then FB lets MS implant their spies throughout the office, setup exclusive ad deals, and put a like button on Bing. Zuckerberg whose supposed to be this visionary doesn't even it coming.

- Take Nokia and factor in Skype. MS has made cell phone carriers obsolete.
- Take Skype and link it with MSN and Hotmail, build a FB import tool (which they could do in house). MS has made FaceBook obsolete.
- Take XBOX, Kinect, link it with PayTV, Skype and BlueRay. MS has just created an all in one black box that does everything for the home.

The history of the IT industry is about to repeat itself. Sell your shares in Apple if you've still gottem.

Re:First post

[CheerfulMacFanboy]

A/UX. Way before NT.

Xenix. Way before A/UX.

Not with a GUI - not even X-Window. Couldn't run any legacy software - because that was before DOS.

Re:First post

[CheerfulMacFanboy]

A/UX was never well supported and anyone who used it was a tool because all the alternatives were superior in every way except they didn't wear an Apple logo. In any case, the argument was actually that MacOS didn't offer it, and it's true. No memory protection until what, OS9? Even though tons of macs had MMUs that you paid for but never got to use... except for virtual memory, which would actually decrease the stability of the system (at least in System 7 and 8, I didn't mess with 9 much, by then I had got well over that nonsense.)

Technically Windows 95 was superior, sure. In practice it wasn't. Multitasking was shoddy, and memory protection didn't help much, because if it wasn't the OS itself that crashed, it were the programs that dared to call any APIs. And Windows 98 was even worse.

Re:First post

[tehcyder]

Yet OS/2 was quite superior to the versions of Windows that Microsoft had out at the time.

Apple OS was superior to Windows at the time. It was superior marketing, cheaper hardware and sneaky and unscrupulous business tactics that gave MS the lead.

You obviously never had to try to use Apple OS 9 or earlier on a (mixed) network.

Re:First post

[1u3hr]

You obviously never had to try to use Apple OS 9 or earlier on a (mixed) network.

Seemed to work okay, but it wasn't my area. Mostly had stand-alones and later connected via Internet mail.

Anyway, obviously it was getting crufty and had to be reworked; Apple tried for 10 years before they bit the bullet and went to X. But in all that time; from the desktop user's point of view, it was very pleasant and a lot harder to fuck yourself up than Windows or DOS.

Re:First post

[drinkypoo]

I will cheerfully call Windows 9x a gigantic festering ball of crap. NT existed before OSX, though, by an ever so slight margin. It's crap too, but it's a real OS in a way that Win9x isn't.

Re:First post

[darjen]

Or do our libertarian-capitalist feelings outweigh our anti-Microsoft ones on slashdot now?

I'm not sure I see much libertarianism in Microsoft. Or capitalism for that matter. Microsoft wouldn't exist as it is without government enforced intellectual property, which is inherently un-libertarian.

To see why read this: http://mises.org/journals/jls/15_2/15_2_1.pdf

Re:First post

[CheerfulMacFanboy]

I will cheerfully call Windows 9x a gigantic festering ball of crap. NT existed before OSX, though, by an ever so slight margin. It's crap too, but it's a real OS in a way that Win9x isn't.

Sure, NT actually was technology far superior to Mac OS - but then it actually ran less programs (even on x86, let alone on other platforms), and hardware (driver) support was terrible. Might as well run Linux then. Or A/UX.

Re:First post

[Osgeld]

maybe you missed all the extra steps JUST to get to the application

Re:Here's some bitcoin reasoning

[tehcyder]

I don't get the "don't support 20-something billionaires" attitude. I don't want to support Zuckerberg because he's an awful douche destroying mankind's concept of privacy for profit, and it wouldn't make a difference to me if he was 20 or 50.

That's probably because you're nearer 20 than 50.

Re:Here's some bitcoin reasoning

[GameboyRMH]

So you're saying that when I get older I'll become some sort of age-bigot?

Re:First post

[1u3hr]

ybe you missed all the extra steps JUST to get to the application

Yeah, because I don't remember having to go through all that crap. I'm pretty sure sit files were associated with Stuffit and just need to be clicked on. Mybe you werent doing it right. Who cares?

I just know that Mac OS 7/8/9 was lot easier to use, especially for the less computer literate office staff (like my boss). This was in the days before people were weaned on Windows.I was brought up on Unix and punch cards myself.

Re:First post

[CheerfulMacFanboy]

maybe you missed all the extra steps JUST to get to the application

Maybe you missed that they weren't necessary. Never. Not once. Just double-click the .sit files - this isn't Windows, were things are made "easy" by stuffing all the programs into one huge, hard to manage menu.

Re:First post

[Osgeld]

I did it fucking Thursday and no it does NOT associate on 7, it does on 8 so right there are 2 things that took over a decade to fix, not being able to select multiple files and not being able to associate with 3rd party programs consistently, both which windows nailed. By 9 the OS was so broken they sought a total replacement as fast as possible, the reason it was one of the shortest lived major releases.

Re:First post

[Osgeld]

it does not auto associate in os 7 (fuck it might with stuffit v2 but I am using 3 something, I am too much of a free spirit to use the version that came bundled with the machine so maybe thats why)

and thats funny, as everything on mac is shoved onto 1 huge hard to manage menubar that totally changes the behaviour of the OS depending on what app is running

Re:First, there were farmers

[Shotgun]

How much does the farmer make if the grain rots in his field because he can't find someone to buy it from him?
A farmer used to be able to tend a few acres of land if he worked really hard. The big industries provided the ability for one farmer to tend to hundreds of acres. Who added more value?
Where did Apple get the money to invest in manufacturing plants to build the computer? Who decides which innovations will be big sellers and which are wastes of time? How much is someone that can see past the haze of ideas to the ones that will actually solve problems that people are having?

The economy looks confusing to you, because you refuse to acknowledge the benefits that others provide.

Re:First, there were farmers

[Shotgun]

What, was it a Facebook fanboi?

Nah. Probably somebody with the intelligence to understand how a economic system more complex than a barter system works. They just couldn't stand your ignorant whining.

Re:First post

[CheerfulMacFanboy]

You are a lying piece of shit - that's what I remember from just reading your crap.

Re:First post

[1u3hr]

I did it fucking Thursday

You're fucking right. Looks like a real fucking showstopper. Better send a report to Steve.

the OS was so broken they sought a total replacement as fast as possible, the reason it was one of the shortest lived major releases.

Yet you're still using it 13 years later... is it just to give you an excuse to vent about Apple?

I've still got a G3 in the corner, ran OS9 on it for several years. No idea what you're doing wrong. Maybe you should read a book.

Re:First post

[Osgeld]

so my current experience with the machine sitting on the desk in the other room, that I have been using darn near daily for darn near a week now is shit cause your nostalgia coloured MEMORY says different...

then you call me a piece of shit? fuck you! I am so sorry that MY computer with a fresh install of the OS does not match your memory I will go back in time and fucking fix it, otherwise NO it does NOT ASSOCIATE stuffit files with stuffit 3.5 on OS7

it MIGHT with the bundled version of stuffit, but I wouldn't fucking know, now kindly go choke on a dick

Re:First post

[Osgeld]

I use it cause I enjoy vintage computers, it lives next to a //c and a 386, and grats on 9 still doesnt change fuck shit about what it does in 7 which if you would stop gobbling steves cock for a second I have mentioned a number of times aready IN OS 7 you fucking dipshit NOT 8 or 9 it fucking works fine there, but then your comparing fucking windows 98 and 2000 to mac os 87 which is pathetic in its own little "mac os was a joke back then" way

Re:First post

[1u3hr]

http://www.tourette-syndrome.com/help.htm

Re:First post

[Osgeld]

while your discovering google for the first time look up asshat

Re:First post

[1u3hr]

http://www.google.com/search?&q=asshat
Result 1 of about 1,320,000 results (0.12 seconds)
http://slashdot.org/~Osgeld

Well, no wonder you're proud.Congratulations!