E-Commerce Times Talkback
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During these tumultuous economic times, even valuable companies show such weak revenues that the entire concept of valuing a company based on earnings multiples may be flawed. But it is still possible for a potential buyer or seller to place a price tag on a tech company. It just takes a little work and a shrewd eye. According to Morningstar.com's David Kathman, "Earnings multiples can be dangerous to use in many areas of tech, because the only way to evaluate them is by comparison with other companies in the same industry."
One needs to be careful not to confuse 'value'
with purchase price. As many readers probably have already noted, the purchase price paid by many companies for their late '90s acquisitions during the 'internet craze' was
by no means reflective of the value of the company. Ask AOL Time Warner, or JDS Uniphase, or any of the other tens if not hundreds of other companies that have had to take $ba-$billions of write-downs for the disparity between purchase price and value.
Analyst Pascal Matzke claims it's unfair to compare, he's full of dust. Of course it's fair.
"Those who do not learn the lessons of history are doomed to repeat it."