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In computer news this week 05/16/2012
Reasons not to buy Facebook
Facebook is doing an IPO this week, and the one sure thing is that its owner and longer term employees are going to get rich. The question of course is will you as an investor get rich too ?
In looking back at the pc industry, we all remember the dotcom bubble of the late 1990’s when the internet was just starting, followed by all the dot com crashes. Millions of investors suffered heavy losses, and many dotcoms simply disappeared.
In comparing Facebook to Microsoft, when Microsoft went public in 1986 they were an established company with several products dominating their marketplace, the cash cow of which was msdos which they had developed for IBM but licensed for themselves. They had substantial international revenues coming in and an established world market position. Their chief executives wore suits.
Facebook is very different from Microsoft, beginning with its ceo who wears a hoody to potential stockholders meetings.
Where Microsoft had many established products in different areas, Facebook’s main product is Facebook itself, which anyone can join for free, and its whole revenue model is based on selling ads on users pages.
We are currently at the acme of the growth of social networking – the concept that anyone can have a presence on the web and communicate with their friends. Some of the unknowns, which we are just beginning to become aware of, are the downsides of sharing too much information about yourself, and the security risks involved with this social phenomenon
The pc industry itself is fickle and littered with the ghosts of companies that once dominated a marketplace, only to be replaced by newer better software. The first dominant word processing program was one called WordStar, which was replaced by word perfect, which was replaced by Microsoft’s Word.
In the spreadsheet marketplace, the application which launched the pc industry was the spreadsheet program visicalc which ran on an early apple computer and later ported over to the first generation of pc’s, followed by Lotus 123, then Quattro Pro, and now Microsoft’s excel.
Back in the 90’s AOL had a big social networking area where you could set up a profile and meet people world wide. You had to pay to join AOL and there was an hourly fee for usage.
When social networking grew Myspace was once the dominant leader, but fell by the wayside. Now Facebook is #1, but who knows what’s coming down the line, in term of possible competitors to facebook – twitter has been named – or totally new technologies which we haven’t thought of; the better social networking mousetrap.
You can do a google search for reasons not to buy Facebook and you will find many articles written by professional investors pointing out various other red flags about Facebook, but my gut feeling is that like most thing related to the pc industry. It’s a whole lot of hype and smoke, and not much substance.
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This is Frank Delaney
(C) 2012 MTA Micro Technology Associates