Facebook= Skype...Valuations....who cares.....

Guess it has been long since I made a decent post....

But overall I have been burning the midnight oil for the past month (Ok..I went to my home town and had a gala time with my folks).....

Coming back on track....

"Valuation is more of an Art than Science"....But the problem with valuation is .....once done wrongly it tends to pinch everybody ranging from the Ivory tower...to the workshop.....the last internet bubble provided enough evidence of this scenario....And I guess oldtimes are back

Recent events in the US seems to provide good indications of significant lapses made by big time company while making "strategic" acquisitions...a typical case in point is the much touted " Skype Acquisition" by E-Bay.. Ebay recently announced that company is writing -off more than $ 1.0 Billion of goodwill value due to impairment (Just like that...one moment it is there in the balance sheet and the next moment it is not) of assets ...In laymans word ...they committed a blunder by losing more than $1.0 Billion on a business model which they didnt understand ( I still maintain that skype has a good business model...it is just a good company in wrong hands)...

Close to the heels of this announcement by Ebay.....Microsoft recently took an equity stake in facebook

It's official: Microsoft will take a $240 million equity stake in Facebook during its next round of financing, valuing the company at a whopping $15 billion.

Great....Kudos Microsoft there you go ...Beat the Google guys in their own game....

Euphoria over.. now let us analyse this deal

Last year Yahoo came close to acquiring Facebook for $ 1.0 Billion when compared to the current $15.0 Billion valuation by Microsoft ( why does Yahoo always underquote)....I find the leap from $1.0 Billion to $15.0 Billion quite insane...and I do not know where the fundamentals of valuation got lost in this whole proces. It makes you feel that it is more like shooting arrows in the dark than seriously analysing cashflows...



The company plans to make its money through advertising ...donno how much though....As an article in tech crunch points out the valuation and numbers doesnt match well.....

So would Facebook be another Skype for E-Bay ....Besides I guess Microsoft should be wise enough to get back value for what it pays....the only question is how!!!!!!