Facebook officially goes public tomorrow, with an initial price of $38 per share. That price has largely been set due to initial demand and absolutely nothing to do with any form of rational thinking.
Yes, there are going to be some very wealthy people tomorrow both on paper and in their pockets. Those that are wealthy on paper are those that have a lot of Facebook shares and those that have their pockets overflowing with money are those that sell some or all of their shares tomorrow.
Here is the problem. Facebook pulled in only about $1 billion in revenue last year. That is no number to sneeze at, but with their IPO price of $38 per share, that values the company at about $104 billion dollars. Is their P/E ratio really worth being at 104?
Google's P/E ratio is 18.9. Apple's is 12.9. Even non-tech giants Johnson & Johnson and General Electric hang out at 17.4 and 15.3 respectfully. Sure, those companies have been public companies for much longer, and have even had significantly higher P/E ratios then they do now (especially Google and Apple).
So yes, Facebook's stock price will probably even rise tomorrow and perhaps into the next week as people trip over themselves just to get a piece of the action.
But the price will fall. It has to. Unless Facebook comes up with an amazing new revenue stream over the next several quarters. Once the P/E comes under 25 or so, it would be worth looking into owning.
That is, unless the company is one of so many other tech companies who were the hottest thing going and is no more - and is beginning to be passed by some new kid on the block.
Come tomorrow, take a pass on Facebook. Wait until their revenues come up, or the stock price falls then jump in. One or both of those will happen, and that, you can take to the bank.
Thursday, May 17, 2012
Monday, May 14, 2012
Think about the short term but focus on the long term
I have always been annoyed by something in the world of business. It's not a new problem. In fact, I'm not even sure how many people even realize it is a problem. However, it is something that should be looked at more and something should be done about it.
There is just way too much focus on company quarterly earnings reports.
I suspect that a lot of this is being driven by the 24/7 media cycle we find ourselves in these days. The media talking heads that are on all of the tv networks, business websites or bloggers such as myself need stuff to write and talk about. It is easy to talk about companies quarterly earnings because it gives great talking points about where the business currently stands, and provides contrast against prior quarters.
Add all of this to 'meeting analysis' expectations' and it becomes easy to see how companies can shift focus to maintaining the good news every quarter - and maintaining a good stock price. When those expectations become too much, companies can turn to various shady practices to keep the good times rolling, but they will inevitably get caught.
That is why I believe companies should continually maintain focus on their long term plans, strategies and growth. Yes, short term thinking is obviously needed, but don't let it overtake focusing on the long term.
However, companies must maintain their focus on the long term. By doing so, short term plans will take care of themselves. Yes, there will be quarters of disappointing news, but it happens to all companies. Don't lose sleep over that and keep looking forward!
Tuesday, May 8, 2012
The coverup is worse than the crime, Part II
A few weeks ago, I wrote about how former Arkansas football coach had an issue with credibility. Sure enough, there is another situation, that has some similarities to what I wrote about.
This time around, it was announced yesterday that the Scott Thompson, CEO of Yahoo, has been caught padding his resume. Today, the board member in charge of hiring Thompson is not going to run for re-election to the board. There is only one step left in this story to have yet happen.
Thompson must resign from his position or the board should fire him.
As it stands, Thompson has zero credibility with any of his employees. Or at least he would have none with me if he were my CEO. His deception is telling all of his employees that it is OK to lie to get ahead.
While it appears on the surface that he is qualified to be the CEO of a large company, if he is willing to lie about the credentials that he has, what else is he willing to lie about?
Yahoo has been a company that has been in trouble for a long time. They need a leader that not only people within the company can depend upon, but those outside. Thompson is not that leader.
This time around, it was announced yesterday that the Scott Thompson, CEO of Yahoo, has been caught padding his resume. Today, the board member in charge of hiring Thompson is not going to run for re-election to the board. There is only one step left in this story to have yet happen.
Thompson must resign from his position or the board should fire him.
As it stands, Thompson has zero credibility with any of his employees. Or at least he would have none with me if he were my CEO. His deception is telling all of his employees that it is OK to lie to get ahead.
While it appears on the surface that he is qualified to be the CEO of a large company, if he is willing to lie about the credentials that he has, what else is he willing to lie about?
Yahoo has been a company that has been in trouble for a long time. They need a leader that not only people within the company can depend upon, but those outside. Thompson is not that leader.
Monday, May 7, 2012
What a company doesn't say, says everything
I had the opportunity earlier today to speak with Jessica Miller-Merrell about the "resume black hole." She was soliciting feedback from job seekers for a column she was writing and wanted to know if someone had any experience with this issue.
While I don't know what her column says in it's entirety, I would like to talk briefly about this and one other issue where those who interview for a position, never hear anything back from the company after that interview. I've experienced both situations, and those are both things that reflect poorly on the company.
When applying for a position for a company, I almost always receive an automated e-mail acknowledging that the company has received my application. What happens next is always disappointing: Never hearing anything ever again regarding that position.
I understand I'm not always the best candidate for a position. I understand I'm not always going to be asked to interview for a position. But if this is the case, at least send me an e-mail telling me that I will not be asked to interview.
The same thing goes for the second issue I am talking about: Interviewing for a position and that is the last you hear from the company. This has happened to me on a number of occasions, but I'll detail perhaps the worst.
I traveled out of state to interview with a well known company. They told me I was going to be meeting with eight different people, and the process would take most of the day. Not a problem. I was all set.
So the interview comes and goes and everything seemed to go great. I know I was not the only person considered for the job, but I felt confident about my chances. After I returned home, I sent out thank you notes to everyone that I had interviewed with. Then nothing.
No response from anyone. No acknowledgement that the company had ever made a decision either in my favor or against.
When either situation happens, it makes me wonder if the company can't even appropriately deal with potential employees, how do they treat their current employees? It certainly can't be all that well and it tells me a lot about that company - and it is not good.
Doing the simple things goes a long way towards making your company look great. Just by properly informing candidates that they are no longer being considered for one position, makes it much more likely they will come back to you when you have other positions available.
While I don't know what her column says in it's entirety, I would like to talk briefly about this and one other issue where those who interview for a position, never hear anything back from the company after that interview. I've experienced both situations, and those are both things that reflect poorly on the company.
When applying for a position for a company, I almost always receive an automated e-mail acknowledging that the company has received my application. What happens next is always disappointing: Never hearing anything ever again regarding that position.
I understand I'm not always the best candidate for a position. I understand I'm not always going to be asked to interview for a position. But if this is the case, at least send me an e-mail telling me that I will not be asked to interview.
The same thing goes for the second issue I am talking about: Interviewing for a position and that is the last you hear from the company. This has happened to me on a number of occasions, but I'll detail perhaps the worst.
I traveled out of state to interview with a well known company. They told me I was going to be meeting with eight different people, and the process would take most of the day. Not a problem. I was all set.
So the interview comes and goes and everything seemed to go great. I know I was not the only person considered for the job, but I felt confident about my chances. After I returned home, I sent out thank you notes to everyone that I had interviewed with. Then nothing.
No response from anyone. No acknowledgement that the company had ever made a decision either in my favor or against.
When either situation happens, it makes me wonder if the company can't even appropriately deal with potential employees, how do they treat their current employees? It certainly can't be all that well and it tells me a lot about that company - and it is not good.
Doing the simple things goes a long way towards making your company look great. Just by properly informing candidates that they are no longer being considered for one position, makes it much more likely they will come back to you when you have other positions available.
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