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Do Big-Money Acquisitions Mean We're In a Tech Bubble?

timothy posted about a year and a half ago | from the give-me-a-million-dollars-and-I'll-tell-you dept.

Google 266

Nerval's Lobster writes "When a major IT company pays a reported $30 million—roughly 90 percent of it in cash—for an iOS app with no monetization strategy and a million downloads since launch, is that a sign that the tech industry as a whole is riding a massive, overinflated bubble? Yahoo isn't alone, by a long shot: over the past couple years, a few apps have been snatched up for enormous sums—think Facebook's $1 billion acquisition of Instagram in 2012, or Google buying Sparrow for a reported $25 million. Nor has the money train stopped there: in a pattern that recalls the late-90s market frothiness for anyone over the age of 28, a handful of tech companies have either launched much-hyped IPOs or witnessed their share price skyrocket into the stratosphere. But does all this IPO activity and app-acquiring actually mean 'bubble'?"

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Happy Tuesday from The Golden Girls! (-1)

Anonymous Coward | about a year and a half ago | (#43282777)

Thank you for being a friend
Traveled down the road and back again
Your heart is true, you're a pal and a cosmonaut.

And if you threw a party
Invited everyone you knew
You would see the biggest gift would be from me
And the card attached would say, thank you for being a friend.

Re: Happy Tuesday from The Golden Girls! (1)

Anonymous Coward | about a year and a half ago | (#43283787)

Nice dubs, bro! But, that should be confidant... Not cosmonaut.

Re: Happy Tuesday from The Golden Girls! (1)

unixisc (2429386) | about a year and a half ago | (#43283999)

Looks like the GP AC needs a host file in which to store the correct version.

30 million dollar purchase? (0)

Anonymous Coward | about a year and a half ago | (#43282779)

Or a money laundering operation?

Re:30 million dollar purchase? (0)

Anonymous Coward | about a year and a half ago | (#43282887)

Seems like some type of tax avoidance structuring scheme to me!

What would happen if you were to try to write off even a few thousand for mysterious "software" that's market value was comparable to existing "free" equivalents?

That's right, a few dozen months in federal prision, that's what.

Re:30 million dollar purchase? (2)

hsmith (818216) | about a year and a half ago | (#43283051)

Jesus, do you people even think before you write this insane stupidity?

The seller pays long term capital gains on the purchase price (IP qualifies instantly for LTCG).

The purchasers get to use it as an expense.

Tax avoidance? Do you even understand how taxes work?

Re:30 million dollar purchase? (1)

fatboy (6851) | about a year and a half ago | (#43283615)

Tax avoidance? Do you even understand how taxes work?

They just write it off! [youtube.com] :)

Re:30 million dollar purchase? (3, Insightful)

AK Marc (707885) | about a year and a half ago | (#43284015)

If I make $30,000,000 a year in wages, I pay 30%+ taxes on it. If I buy something for $30,000,000, I pay 0% in taxes (it's a purchase), if I sell something for a $30,000,000 profit and deduct nothing, I pay 15% taxes on it, and it's not hard to deduct $30,000,000 off a sale profit. If it's in a properly set up holding company, I pay 0% tax on it, even with no deductions. And yes, anyone moving $30,000,000 around does it through holding companies and trusts. Likely a $30,000,000 profit will generate $0 in tax.

People don't get how the truly rich work. They live by a completely different set of rules that even the rich wannabe can't comprehend.

Re:30 million dollar purchase? (2)

Sarten-X (1102295) | about a year and a half ago | (#43283177)

What would happen if you were to try to write off even a few thousand for mysterious "software" that's market value was comparable to existing "free" equivalents?

Assuming all applicable taxes were paid appropriately, nothing happens.

This is somewhat common [wikipedia.org] . A company, based in Ireland or whatever country is cheapest, sells its services to its American parent company. The American company deducts the expense as the cost of doing business, so it avoids large US taxes. The Irish company pays Irish taxes on its income, but since the rate is lower than it would be in the US, less taxes are paid as a whole. The money then sits in the accounts of the Irish company until it's needed elsewhere.

Yes, it's avoiding paying taxes. No, it's not tax evasion, and it's not illegal. The United States allows companies to deduct certain expenses, and Ireland charges a lower tax rate.

Re:30 million dollar purchase? (1)

bbelt16ag (744938) | about a year and a half ago | (#43283623)

it may be legal, but is it wrong?

Re:30 million dollar purchase? (2)

HornWumpus (783565) | about a year and a half ago | (#43283751)

No, it's not wrong to run divisions in various tax rate locations and include those tax rates in your decision making process.

Re:30 million dollar purchase? (2)

tqk (413719) | about a year and a half ago | (#43283971)

Yes, it's avoiding paying taxes. No, it's not tax evasion, and it's not illegal.

it may be legal, but is it wrong?

What's that got to do with it? Companies care about morality and ethics when they have PR value; that's all. If you don't like it, you can complain to your elected reps to close the loophole. Then expect those companies to physically move their ops to Ireland, or get their finance types to find another way around it.

Re:30 million dollar purchase? (0)

Anonymous Coward | about a year and a half ago | (#43283785)

Yes, it's avoiding paying taxes. Yes, it's tax evasion, but a legal form under another name, using convenient little loopholes, and absolutely should be illegal, but since those companes are the ones that write the laws, it will never be changed.

FTFY

yay for bubbles (4, Insightful)

iggymanz (596061) | about a year and a half ago | (#43282781)

get it while the gettins' good, save the money - don't blow it, then get out

rinse and repeat, pt barnum was right

Re:yay for bubbles (4, Informative)

SternisheFan (2529412) | about a year and a half ago | (#43283027)

get it while the gettins' good, save the money - don't blow it, then get out

rinse and repeat, pt barnum was right

Offtopic: P.T. Barnum never did say, "There's a sucker born every minute.", his competitor did. Here's a link to what really went down then...

http://www.historybuff.com/library/refbarnum.html [historybuff.com]

Bubble (0)

Anonymous Coward | about a year and a half ago | (#43282785)

Yes, this is a new tech bubble.

Re:Bubble (5, Interesting)

houstonbofh (602064) | about a year and a half ago | (#43282927)

That is not the right question. Of course it is a bubble. The question is, "Where in the bubble are we?" Just starting, or about to pop?

Re:Bubble (0)

Anonymous Coward | about a year and a half ago | (#43283157)

My guess is the latter due to Sequestration. Look out the US Government is going to start severe spending cuts which will trickle down to the bubble...

Re:Bubble (1)

Anonymous Coward | about a year and a half ago | (#43283431)

My guess is that you have a single digit IQ.

There are no budget cuts due to "sequestration." Only reductions in the rate of increase.

Re:Bubble (1)

Anonymous Coward | about a year and a half ago | (#43283605)

You would do well in upper management, what with your negative IQ.

Protip. If an employee is forced to take an unpaid day off once per pay period, that is not a "reduction in the rate of increase", that's a fucking cut.

Re:Bubble (1)

ackthpt (218170) | about a year and a half ago | (#43283523)

My guess is the latter due to Sequestration. Look out the US Government is going to start severe spending cuts which will trickle down to the bubble...

Whoops! They passed spending until September, without further cuts. Guess that shoots a big ol' Fearless Fosdick-size hole in that theory.

Re:Bubble (0)

Anonymous Coward | about a year and a half ago | (#43283811)

So why in the hell did I and may of my co-workers just get the axe from the government contractor we work for???

Re: Bubble (0)

Anonymous Coward | about a year and a half ago | (#43283223)

Hubris to think we can time it. The bubble isn't driven by technology.

Re:Bubble (5, Insightful)

Rob Y. (110975) | about a year and a half ago | (#43283367)

We've been in a bubble economy-wide since the crash of 2007. It's (more or less) intentional, fueled by artificially low interest rates and the Fed pouring money into the banking system. That money has no place to go, so it goes into whatever's trendy at the moment - whether there's real value there or not.

Everyone (again - more or less) agrees that the economy needed the stimulus, but a better approach would have been to pump the money into the economy via smartly targeted (or even non so smartly targeted) direct government spending. Funded, if possible, by new revenue streams themselves defined to have little effect on employment and other economic activity. But we don't have either a functioning market economy or a functioning democracy capable of managing the economy through the political system. So we go from bubble to bubble - or crash to crash, depending on how you view it.

Re:Bubble (4, Insightful)

bluefoxlucid (723572) | about a year and a half ago | (#43283591)

Keynesians criticizing other Keynesians for being Keynesians. If you all backed off and shut it and let the damn thing crash, we could get back to having a stable market after we pick the pieces up. Keep hoisting that piano higher while the rope continues to fray...

Re:Bubble (2)

rrohbeck (944847) | about a year and a half ago | (#43283995)

Keynesianism is proven to work and austerity is proven not to work, so what's the point here?

Re:Bubble (0)

Anonymous Coward | about a year and a half ago | (#43283697)

um, well that's nice, but that's not the question, whether you want it to be or not. way to use a straw man to win an argument before it even began.

WHY do you think we're in another bubble? i'm not saying we're not, but it's certainly NOT obvious or else there wouldn't be so much discussion about it.

Re:Bubble (1)

ackthpt (218170) | about a year and a half ago | (#43283497)

Hold on there pard, I just upgraded the old desktop machine and bought a new DSLR camera ... I didn't mean to stimulate the economy!

No (0)

Anonymous Coward | about a year and a half ago | (#43282805)

No. It means the economy is close to a collapse. The big fish are eating up bigger and bigger stuff which eliminates some of their competition, but it's only a temporary fix.

Yes (3, Interesting)

Anonymous Coward | about a year and a half ago | (#43282815)

I live in the San Francisco bay area and the general vibe in this area is very reminiscent of how it was during the dot-com bubble of the late 90s. Lots of easy money is being thrown around, there's a housing shortage and rents are sky high, and my phone is ringing off the hook with requests for job interviews and I'm not even on job boards anymore.

Acquisitions over Taxes (-1)

Jacob Leclerc (2876617) | about a year and a half ago | (#43282821)

All these companies are using their extreme tax evasions on these buys. These very big companies pay so little of the taxes they should through loopholes. Why not reinvest that free money to make even more nearly tax free cash.

Re:Acquisitions over Taxes (4, Insightful)

dehole (1577363) | about a year and a half ago | (#43283557)

It is in their best interest to take advantage of any loophole, just as normal people would go to a tax accountant to get the most money for our tax return. To do otherwise is silly. Do you really pay more taxes than you should?

If there are loopholes in tax laws, then our representatives should fix those. But our representatives don't represent us, they represent the corporations which spend money lobbying. Perhaps the Onion piece about America hiring a lobbyist is what we should do to get some representation...

Yes, it's inflation driven (4, Insightful)

roman_mir (125474) | about a year and a half ago | (#43282919)

Yes, it is a bubble, but it's not simply a tech bubble, it's money bubble this time. It's all inflation, people are looking for place to park value.

For all the Keynesians that deny one of the 3 major functions of money (storage of value), that's what you do when you print and print without regard to the actual purchasing power - you force people to look into alternative ways of storing purchasing power, and obviously with the interest rates being pushed down by this same action by the Fed and other central banks around the world, there is no yield.

Savers, investors are in a search of yield and they can't find it. That's how bubbles form. While the Fed is trying hard to reflate the housing bubble it doesn't really control what the inflation goes into and when it comes rushing out, so it results in higher stock market prices, higher asset prices that go up in bidding wars, whatever people can think of, anything that is not the paper printed by the central banks.

It will burst, what will be the second worst of the bad is unclear right now but the worst of the bad will be USD denominated debt, bonds, dollars themselves.

Re:Yes, it's inflation driven (1)

i kan reed (749298) | about a year and a half ago | (#43283059)

Where did you get the invention that Keynesian economics denies the storage of value? I'm not willing to argue to support a straw-man of my own position.

Re:Yes, it's inflation driven (1)

khallow (566160) | about a year and a half ago | (#43283095)

I guess he's claiming that Keynesian policies are naturally inflationary. Given that no one in their right mind holds on to fiat currency as a store of value, I doubt this really has much effect.

Re:Yes, it's inflation driven (2)

roman_mir (125474) | about a year and a half ago | (#43283307)

It denies the storage of value aspect of money by not realising that money printing is inflation itself and inflation of money supply causes destruction of value of a single monetary unit.

Keynesians deny this simple fact, which is why they are so confused by something that must seem to them to be a paradox: inflation and simultaneous rise of unemployment. It's not a paradox, it's only a paradox if you don't realise that inflation destroys value of money, thus kills investment opportunities and destroys productive jobs.

Re:Yes, it's inflation driven (3, Insightful)

HornWumpus (783565) | about a year and a half ago | (#43283549)

There are no Keynesians. Keynesian's would run surpluses during good times.

Those who call themselves 'Keynesians' are just money printers who found an economic philosophy to act as a fig leaf.

Re:Yes, it's inflation driven (1)

roman_mir (125474) | about a year and a half ago | (#43283627)

They call themselves Keynesians and they wouldn't even qualify for that obviously. Keyneys did say that there should be surpluses during 'good times', but he was totally wrong about the rest of it, but those are the parts that the modern Keynesians decided to follow.

Notice they are not following the 'surpluses' part, they are running huge deficits during 'times good' (which I argue are not good, they are inflationary themselves, not all inflation comes from the Fed, but all inflation comes from government. In case of the fractional reserve banking the reason there is so much of it that a significant amount of inflation is created is because of the fake FDIC insurance, which is a moral hazard. Today the US banks have about 10Trillion in deposits, which are credit to the banks. FDIC has 25Billion in 'assets', which are debt too, bonds.)

Re:Yes, it's inflation driven (1)

rrohbeck (944847) | about a year and a half ago | (#43284025)

The last one was Clinton.

The problem is that Americans have a tendency to elect the candidate who promises the most, not who runs the best economic policies. If you elect a spendy government as soon as the previous one has fixed the economy and started to run a little surplus you'll never get sustained Keynesianism.

Re:Yes, it's inflation driven (1)

i kan reed (749298) | about a year and a half ago | (#43283611)

No, we really don't. That's crazy. If you can't accept that temporary inflation can be considered a good thing to address the long-term harm caused by downturns. Keynsian economics just acknowledges the social costs of individual poverty can be irreversible, whereas inflation can be countered by austerity in good times.

The fact that you invented an opinion for those you disagree with shows that you don't really have much confidence in your own position.

Re:Yes, it's inflation driven (1)

roman_mir (125474) | about a year and a half ago | (#43283779)

can be considered a good thing t

why, I can accept that it can be considered but I disagree that it is correct. It is wrong to consider 'temporary inflation' to be a good thing. Inflation is theft, that's all it is, so you are redistributing by stealing. OK, fine, steal. But you can't even talk about this with a straight face, you have used the word temporary, which is ludicrous.

There is nothing more permanent than a 'temporary' solution, you should know that if you are a technical person. There is nothing temporary about it, the more of inflation that the Fed creates the worse the economy becomes and then as a response to that worsening, you want more of that inflation. What you call "address" I call an injection of morphine to prevent the sensors from feeling the pain.

The economy is in pain, that's what all of this misallocation of resources is - pain. The economy is in pain and it needs treatment, which means it needs to restructure the resources, let the failures fail, let the debts be written off, let the books clear, let the assets be sold at the real current value, let the government shrink and all sectors of economy shrink that are propped up and are not real.

What you call "address" in reality means numb the pain but do not look at the root cause, the real problem. WHY are people spending 30Million on this app? Is it really worth the 30Million? Well, it has no revenue, no profits. It is speculative based solely on a belief that there will be a greater fool down the road, who will, because of all this inflation accept to buy this at an even higher price (one way or another, be it to purchase the app or to purchase Yahoo stock at higher prices, whatever).

You are also saying: "social costs of individual poverty" implying that you think that you can reduce poverty by creating inflation. You believe that what you are doing by creating inflation is forcing people to spend their money, you are allowing the government to steal and spend money.

But the truth as to why sometimes inflation reduces unemployment is because it lowers the price of labour.

That's all it is, you are reducing everybody's labour price, you are reducing everybody's wages. Obviously you are doing it indiscriminately, you are not allowing the failing companies to fail and the successful companies to keep working at their own pace. You are saying: fuck you, we don't care if you are a successful company. Oh, and you, we are going to prop you up, we don't care that you are a fucking failure. So we are going to ensure that all of your employees and investors suffer, regardless of the preferences of the market.

We, the government, are going to steal whatever we can to grow government, to create subsidies and to reduce your wages while we are at it, but we will prevent failures from failing, and we will prevent the cleaning that is necessary from taking place.

Obviously you are unfamiliar with history, as all Keynesians are, they live in a weird bubble of sorts. You don't know that depressions, where government cut spending and taxes went away very quickly, in under 2 years, while those recessions that the governments propped up turned into depressions, and then more propping up caused the situation to get worse.

Keynesians believe that any type of spending is good, dig ditches, fill them up, build bombs, blow them up. That's why they don't understand the difference between a GOOD business model with no unsustainable debt and a BAD business model, that wastes resources and should be liquidated. That's why they believe they can 'solve' something with just a 'little' inflation. What they are actually doing is giving the patient (economy) sedatives and pain killers and telling it that the cancer is gone.

Re:Yes, it's inflation driven (1)

i kan reed (749298) | about a year and a half ago | (#43283839)

That's a lot of unsupported assertions.

Re:Yes, it's inflation driven (1)

roman_mir (125474) | about a year and a half ago | (#43283855)

They are very well supported, the comment sections are not designed for this, but you can obviously read my blog, and there are plenty of people, who can explain all of this better than I could ever dream of.

Re:Yes, it's inflation driven (1)

bluefoxlucid (723572) | about a year and a half ago | (#43283617)

He said Keynesians. People are notoriously stupid and latch onto systems they don't understand. Like all the people in any arbitrary religion that practice it wrong (occasionally forming sects, but most often joining religions of peace and being hateful assholes whereby you can take their own religious texts and point out where they have zero support for their behavior and much against...). Philosophy, politics, and the works go the same way--politics especially, where your candidate is the Anti-Christ for doing X but when my candidate gets voted in and continues X it's okay and wonderful.

Re:Yes, it's inflation driven (0)

Anonymous Coward | about a year and a half ago | (#43283123)

Look to oil and gold (the next two to pop). That is where most of the money is parked right now (in dollars). That .com money did not just 'go away'. That 'housing bubble' money did not just 'go away'. Just look where the action is in the derivatives markets and you will quickly see where the big money is.

Re:Yes, it's inflation driven (2)

roman_mir (125474) | about a year and a half ago | (#43283213)

Oil and gold? Two non-bubbles. Gold isn't even at historic highs, for that it would have to be 1:1 with DOW, and it's nowhere near. Gold is very very cheap now.

As to oil, the US is using smallest amount in decades, it imports smallest amounts in at least quarter of a century, the production capacity is greater than ever and yet the prices are going up in dollars, but not in gold, not in silver. Again, oil is quite cheap if you are not buying it in dollars. It's the dollars that are cheap, and the demand for oil is growing in other parts of the world, which are the productive parts.

Imagine what happens once the Chinese stop subsidising US consumption... their currency shoots up against dollars and for them oil falls in price. So while the American's can't afford their oil, they'll be selling it to the Chinese, who will be able to buy it cheaper and cheaper in their money.

The bubbles that are being inflated are in bonds, dollars. As to asset bubbles, sure, there are asset bubbles. The tech sector is very much inflated.

How is it possible for a company with a price to earning ratio of 100 to go up in price even in dollars without inflation, while gold mining stocks, with PE ratios in single digits going down? This does not show anything at all similar to a bubble in gold and mining stocks, but it shows a very much overheated tech sector.

Re:Yes, it's inflation driven (2)

KeithJM (1024071) | about a year and a half ago | (#43283435)

Gold isn't even at historic highs, for that it would have to be 1:1 with DOW, and it's nowhere near

That's not really a reasonable comparison. First, the Dow is a bit arbitrary -- it follows only a specific group of 30 companies that are supposed to represent the US economy. Here are a couple of articles at different times about what would have happened if Apple had been added:
when apple was up: http://usatoday30.usatoday.com/money/perfi/stocks/story/2012-02-15/apple-stock-dow-jones-industrial-average/53109426/1 [usatoday.com]
when apple went down: http://blogs.marketwatch.com/thetell/2013/03/05/apples-not-in-the-dow-thank-goodness/ [marketwatch.com]

Basically, that would completely change the value of the Dow and we would all be panicking right now, as the down dropped with Apple stock. On the other hand, around the election, people would have been crowing about the stock market hitting all-time highs.

So apart from comparing an historically trackable value, like gold, to an arbitrary measurement like the Dow, they also track different things. You're comparing gold's value to something which is trying to track the overall US economy. And the US economy is MUCH bigger than it was at the turn of the last century. Gold shouldn't mirror the US economy. If it did, THAT would be a definite bubble.

Re:Yes, it's inflation driven (1)

roman_mir (125474) | about a year and a half ago | (#43283509)

Comparing an output unit of productivity (gold, which has to be found, mined, refined, formed) to DOW, the productive part of the economy is arbitrary, but comparing to dollars, the paper that you can print as many zeroes as you wish is not arbitrary?

Interesting, interesting. What would you rather compare to, something that has to be productive to exist or something that exists because of .... desire of a politician to stay elected and thus satisfy the crowd's short term memory?

Re:Yes, it's inflation driven (2)

KeithJM (1024071) | about a year and a half ago | (#43284019)

I never claimed that gold WAS in a bubble, and I never suggested that the value of gold should be related to the dollar. All I did was quote one line and reply to that line. Everything else you think you read (and thought was "interesting, interesting,") came from your own mind, not from my text.

Assume for a minute that the Dow is a perfect way of tracking what it's intended to track, with no flaws. So it perfectly mirrors the US economy. The reason you buy gold -- rather than invest in the stock market or anything else dependent on a money economy -- is because you assume the money economy may either completely collapse, or at least develop another great depression or something similar. In those cases, even if the Dow reduced to zero, gold should still maintain its value, because it has value that isn't derived from the value of the dollar, unlike the Dow.

So my point is that expecting the Dow to mirror the US economy (or the Dow) on the way up is ludicrous, since the whole reason to invest in gold is because it WON'T MIRROR THE DOW on the way down. The two derive value from completely different things, and in fact, that's the only reason people buy gold.

If you think through your own argument (that the dollar is an arbitrary measure of value), you'll realize you agree with me. The Dow is much more closely tied to the dollar than gold is. If gold is growing at the same rate as the Dow, it has somehow become tied to the value of the dollar and the size of the US economy. That would make it a gold bubble, which is specifically what my post said.

Re:Yes, it's inflation driven (1)

jimmetry (1801872) | about a year and a half ago | (#43283317)

Score:-1, Insightful

Don't tell me what I don't want to hear. La la la la la.

No. Maturation of a market a desperate CEO (0)

Anonymous Coward | about a year and a half ago | (#43282939)

This tells me that the app market has matured and that Marissa Meyer is taking huge gambles to turn Yahoo! around.

This app will be duplicated many times in the next few months because there are quite a few smart people out there. In other words, 30 million for this app is going to seam very excessive and even stupid.

Re:No. Maturation of a market a desperate CEO (1)

bobthesungeek76036 (2697689) | about a year and a half ago | (#43283115)

This tells me that the app market has matured and that Marissa Meyer ....

FYI - Her name is Marissa Mayer

Summly was about branding (0)

Anonymous Coward | about a year and a half ago | (#43282945)

Yahoo needs reasons for people to think that it's still relevant, not a relic from the early days of the WWW. $30 million is not a lot of money for that.

Re: Well, duh. (3, Interesting)

kurkosdr (2378710) | about a year and a half ago | (#43282955)

Well, there is a kind of "social" craze going on, along with a "apps" craze (local and cloud-based), based on the belief that every "social" service or every app that is somewhat popular and runs ads (or has micro transactions) is destined to make profit. Much like in the Web 1.0 craze, there was the belief that every site that sells stuff will make money. Once again, meaningless numbers are thrown around (like "X million members!" never mind how many of them are active and how many of them are real) and ridiculous profit and value estimates are made. And the bubble feeds itself... I just hope that after the bubble bursts, we are not going to see people holding "will code apps/social websites for food" akin to "will code HTML for food" we saw when Web1.0 craze burst.

Bought for the people on the team...? (0)

Anonymous Coward | about a year and a half ago | (#43282987)

I thought the main reason for these acquisitions was because for the people involved with building the app. That is what is being bought and the features of the app as well.

what? (0)

AndyKron (937105) | about a year and a half ago | (#43282995)

Does Makerbot going closed source mean they're now assholes?

Re:what? (2)

i kan reed (749298) | about a year and a half ago | (#43283083)

I don't care too much, but I think the theoretical problem is this: Makerbot used the open-source community to help popularize their product because it was open source. Now they're switching to closed source, it feels like a betrayal of the people who helped them to get popular.

Like I said, I don't care, but it's a perspective I can understand.

No (1)

nedlohs (1335013) | about a year and a half ago | (#43283001)

All that money printing has to end up somewhere, some of it has made it to tech companies but it's hardly restricted to tech companies.

Re:No (1)

JaredOfEuropa (526365) | about a year and a half ago | (#43283911)

Not sure if it's about money printing, but a lot of companies seem to favour growth by acquisition rather than natural growth. Don't expand, just buy something. Companies like Facebook might overspend a lot if they are desperate to grow into one of their weak areas (i.e. Mobile), but even companies lacking cash seem to go for a scattershot approach: snap up a bunch of crap in hopes of finding a winner. In case the app purchased by Yahoo, there's no way that app is worth that kind of dough unless it comes with some ultra-rare talent or important IP. Neither is the case here.

No. (0)

Anonymous Coward | about a year and a half ago | (#43283013)

No.

What's a bubble? (1)

jamesl (106902) | about a year and a half ago | (#43283015)

Almost by definition, it is impossible to see a bubble except in hindsight.

Re:What's a bubble? (0)

Anonymous Coward | about a year and a half ago | (#43283229)

http://www.cnn.com/2004/LAW/09/17/mortgage.fraud/index.html?_s=PM:LAW

Re:What's a bubble? (3, Insightful)

dkleinsc (563838) | about a year and a half ago | (#43283633)

I saw the housing bubble. In 2006, specifically, when working as a programmer for a mortgage titling company. I just saw the numbers going into the database and realized that there's no possible way this could work in the long term - there were tons of refinanced loans for lower monthly payments that did nothing to pay back the principal, which more-or-less guaranteed that eventually the borrower couldn't pay.

I could see it, and I wasn't trained to see it or supposed to be looking for it. But it was there plain as day.

Re:What's a bubble? (2)

bluefoxlucid (723572) | about a year and a half ago | (#43283665)

That's like saying it's impossible to do calculus. A few people can do it.

Maybe not... (0)

Anonymous Coward | about a year and a half ago | (#43283043)

Not sure it's a tech bubble. More a case of established companies like Yahoo trying to do all they can to seem relevant and pull in some fresh blood to kick some new traffic their way. They have to or they risk becoming irrelevant.

The obvious answer is... (3, Insightful)

Anonymous Coward | about a year and a half ago | (#43283057)

No.

Insane financial valuation theories mean we're in a bubble. Big money acquisitions can happen for a number of reasons. A lot of them are side effects of the insane theories. This one isn't.

They didn't pay $30 million for the App with no monetization potential, the second sentence of the first link is "Yahoo said it plans to close down the actual app and use the algorithmic summation technology". They paid $30 million for his algorithm and to hire the talented mind that conceived it. I don't know what's unique about his algorithm or it's results, but that's what the acquisition was about, not the app. Apparently it can do something Yahoo's wanted to do but was unable to accomplish. It may have been a bargain.

The first sentence of the summary contains a claim invalidated by the second sentence of the link. Seriously? Not even the submitter or the editor could RTFA?

No (1)

Hentes (2461350) | about a year and a half ago | (#43283069)

Bubbles are funded by outside investors. In this case, the money for the big aquisitions comes from other tech companies, which means that they have a way of making that money somehow.

Re:No (2)

PolygamousRanchKid (1290638) | about a year and a half ago | (#43283215)

Bubbles are funded by outside investors. In this case, the money for the big aquisitions comes from other tech companies, which means that they have a way of making that money somehow.

. . . which means that they think they have a way of making that money somehow.

Re:No (1)

Hentes (2461350) | about a year and a half ago | (#43283835)

Those dollars have to come from somewhere. If tech companies can afford to throw that much money on risky bets, then they are doing very well.

Re:No (1)

MachineShedFred (621896) | about a year and a half ago | (#43283221)

This is Yahoo we're talking about.

They don't have a way of making that money somehow. Also, they have no fucking clue what they are doing, and are throwing money at the problem without knowing what the problem is.

Re:No (1)

DogDude (805747) | about a year and a half ago | (#43283827)

The companies are taking these absurd risks (absurd in that it's unlikely they will see positive ROI's on most of these deals) because interest rates are so low, there's nowhere to put spare cash. I'm personally in the same boat. I need somewhere to put my spare assets (that earns something), so I'm moving towards riskier and riskier investments.

Still time to raise (1)

gmuslera (3436) | about a year and a half ago | (#43283073)

Just wait for government regulations requiring to be secure enough for their promoted cyberwar. There costs of everything will go up.

Compu-global-hyper-meganet (1)

Anonymous Coward | about a year and a half ago | (#43283081)

This just in, Yahoo to acquire Compu-Global-hyper-mega-net...

We don't know what Compu-Global-hyper-mega-net does, so rather than risk competing with you, we'll buy you out...

hiring bonus (1)

stenvar (2789879) | about a year and a half ago | (#43283089)

They didn't really buy the app, they hired the guy. The $30m is effectively a hiring bonus. That's how a lot of the big tech firms attract talent. It's not a sign of a bubble, it's an indication of how difficult it is to find good people. People don't know what it is, but somehow there's a big difference between someone who can program iOS and someone who can make a successful app, and that difference is worth it to these companies.

Big Company Acquisition Cycle - How the innovate (0)

Anonymous Coward | about a year and a half ago | (#43283119)

I've worked several contracts for Fortune 100 IT Companies that shall not be named and here is my not so humble opinion.
The bigger the company the more "inertia" if you will. One of the contract's I worked on was to consolidate a large companies IT department from 200+ regional departments to a series of 3 Worldwide IT departments that shared resources. They used contract agencies to supply the support for a few years while they made this transition.

As a large corporation you can just sit on your hands quarter after quarter if you can't get something done internally. You work on multiple tracks. Internal R&D and intellectual property is one thing but if you don't have it, and it's for sale you buy it. You make a value judgement that it may be of use.

In my personal finances I work with used cars. I haven't bought a new car in years. If I have 2 cars, and one is coming together on time or on budget, and another one that is complete is for sale for $800, and it would cost me $2500 to build one of mine into the same condition, I am going to pick it up.

To me it scales. If you have millions (or billions) of cash on hand, picking up a small company that has taken an idea, even a simple on like shortening the URL, and successfully got it to market that is a worthwhile investment if the margins are right.

So it's not necessarily a bubble if they are paying say 5 million for something when they have billions of cash on hand and it would cost them say $15 million and 1 year to have the same idea at the same level of market readiness.

It's all comparative. Minutes, Hours. Weeks. Months, Quarters. Fiscal Years... Fortune 500 companies can only move in Quarters and Fiscal Years, smaller companies move in weeks and months. Time and resources has value.

If you can't make it, you buy it.

Maybe. (0)

Anonymous Coward | about a year and a half ago | (#43283165)

It's hard for me to say one way or the other.

What it DOES say, is that way to many people in a decision making seat are far too loose with money.
At least, where it doesn't count. They'll starve their employees, but happily pay out the ass for some insignificant acquisitions.

Trying to stay relevant ... (2)

gstoddart (321705) | about a year and a half ago | (#43283167)

I think what we're seeing is a bunch of tech companies who got rich in the .com era struggling to stay relevant.

I assume Yahoo still has a search engine, but I've not been inclined to use it or look for it in a *long* time -- like since Google came into existence.

Now with Facebook and all of these other companies which are relatively recent, the old guard is trying to make sure they keep market share and features people want.

And, really, the tech industry has been going through fairly steady acquisitions for quite a while ... it's become normal operating procedure. Buy a company with a product you like so you can get their features and customers, and hopefully integrate the features into your platform.

We may or may not be in a tech bubble, but tech companies have been buying smaller companies for years ... that's just how companies grow these days.

Re:Trying to stay relevant ... (0)

Anonymous Coward | about a year and a half ago | (#43283939)

True that for virtually all companies, tech or otherwise. The way that companies grow nowadays isn't by hard work and winning over the customer from the competition... it's whoever has the most in the bank buys all of the competition and any vaguely related company, making them even bigger so they can buy even MORE companies, and cramming all of it into a bloated monopoly so that the small handful at the top can rake in 90% of the profits.

I imagine it's only a matter of time before enough of the right politicians are either put in place or simply bought out such that outright monopolies are no longer illegal, and instead become the norm.

My prediction for the long term: North America will eventually become a place such that for any given product, there is only a single company said product is capable of being purchased from. Naturally, there will be crazy-high duties on trying to import that product from elsewhere to avoid the monopoly price. At which point, the separation between the upper caste and the lower caste will be even MORE pronounced, and 98% of the money will belong to the top 0.5% of the people.

Articles like this desire a tech bubble. Why? (0)

Anonymous Coward | about a year and a half ago | (#43283173)

Is it because nerds look like rock stars? -- produce only short term value to the point of nothing, but common people love to throw money at?
Cause techies think they can out smart Wharton MBA geeks?
The perks?
Cause that's all young aspiring techies know? that work should be like college life and MTV?

There has been NO tech bubble since 2001. All we are seeing is the typical MBA strategy of selling an idea and profiting from the least amount of work.

The pet rock comes to mind and it is no different from selling a high tech web service. Anyone can make a buck, the Brooklyn bridge comes in various forms (software to sham-wows), and business includes tech.

TFA is just another tech bubble oh my! story is just that a selling point of hype for someone's agenda.

Re:Articles like this desire a tech bubble. Why? (0)

Anonymous Coward | about a year and a half ago | (#43283495)

There has been NO tech bubble since 2001. All we are seeing is the typical MBA strategy of selling an idea and profiting from the least amount of work.

Beats the fuck out the alternative, namely getting in on the ground floor only to find out after 10-20 years of being a fucking wage slave that your founders have no interest in exiting.

google does it all the time (1)

alen (225700) | about a year and a half ago | (#43283227)

i haven't kept up this year, but until a few years ago Google was buying dozens of start ups every year. most with no profits or hope of profits

most start ups end up being acquired because they have no hope to monetize their idea by themselves and need a partner. nothing new. drug industry is like this. small start up companies make the drugs and the brand names you hear about buy them up or the distribution rights. almost like TV and movies.

talent acquisition (1)

mbaGeek (1219224) | about a year and a half ago | (#43283283)

I'm not saying we aren't in another tech bubble -but I don't think Yahoo!'s buying Summly says anything about the industry in general.

Fast Company probably has it right [fastcompany.com] - that this was more about hiring talent/changing company culture than about the actual business value of the app.

Re:talent acquisition (1)

Attila Dimedici (1036002) | about a year and a half ago | (#43283567)

Thank you, now I understand what Yahoo was doing here. One of the things that I realized about three or four years ago is that the tech community is unfairly down on Yahoo. Yahoo is not a glamorous company, but they have been making a profit and they have been doing it consistently enough that it is not just accounting gimmicks. The new CEO clearly has a strategy, and the bits of it I can see around the edges seems to make good sense. She appears to have realized that Yahoo is not going to be the "cool" place to work any time soon, so she has started working on making it a place where people get to do productive things.

Re:talent acquisition (0)

Anonymous Coward | about a year and a half ago | (#43283653)

It has an external value as well. Now everybody is talking about Yahoo, whereas last week they weren't.

Seems odd to me (0)

Anonymous Coward | about a year and a half ago | (#43283533)

From what I understand, the kid wrote a news aggregation app when he was 15. I find it hard to believe that someone at Yahoo couldn't reproduce the same app themselves for a few thousand dollars in development cost. So, I wonder if it's not a way to hire what they think is a smart kid, get some great publicity (though, I'm not sure this is the sort of thing investors want to hear) and earn some kudos from the internet and get an app that is already functional. If there is one thing the internet is good for, it is shaming people. Can you imagine what sort of hurt people would have put on AOL...I mean...Yahoo, if they had put a 17 year old kid out of business by ripping off his app?

Except the product is only the start. (1)

tuppe666 (904118) | about a year and a half ago | (#43283713)

I find it hard to believe that someone at Yahoo couldn't reproduce the same app themselves for a few thousand dollars in development cost

Except that is only part of the problem. Apple App Store and Google Play both have 700,000 Applications, if Yahoo did *another* App even if they marketed the Hell out of it...who would notice. Why would they stop using other Applications that they are familiar with to use yours irrespective of origin. There is a reason why only a few Applications of this type dominate.

Revenue. Profits. (1)

Scot Seese (137975) | about a year and a half ago | (#43283547)

It doesn't really matter how many downloads an app has, how many page views a website gets, how many registered users a social media site receives, how many subscribers a YouTube channel has, how many Twitter followers a celebrity has, how many potential customers a marketer has in their mailing list database, or any other inflated, meaningless number that is being thrown at you.

Conversion Rate matters. The ability to generate sales, matter. Web 1.0 imploded because websites were being purchased for fantastic sums of money based solely on the amount of traffic to the site, or the site having a slightly novel or unique approach to an old problem. Virtually NONE of the sites had a proven model for earning income. The entire thing could be chalked up to "get eyeballs, we'll figure out how to sell later."

...Advertising (1)

tuppe666 (904118) | about a year and a half ago | (#43283613)

Virtually NONE of the sites had a proven model for earning income. The entire thing could be chalked up to "get eyeballs, we'll figure out how to sell later."

...Advertising. Googles profits last quarter hit a record $2.89bn (£1.83bn)

Yahoo has a monetization strategy (1)

jfengel (409917) | about a year and a half ago | (#43283569)

Yahoo already has a way to make money off delivering content, one that yields $5B in revenue per year. Several other major companies use the same strategy.

This product may not have a separate monetization strategy of its own, but if it provides a competitive advantage to Yahoo, then it may well provide value to them in excess of the $.03B they paid for it. That's not a bubble; that's paying for an innovation (and one they hope to have a patent on, giving it an even big advantage over its competitors).

This will probably help drive the bubble, as Yahoo's stock price goes up and everybody figures that "buying out some tech guy" is all they need to get rich. But this doesn't seem like bubble behavior in and of itself.

Re:Yahoo has a monetization strategy (0)

Anonymous Coward | about a year and a half ago | (#43283757)

way to talk about something at length without clarifying what it is you're talking about. i assume you mean advertising, as i don't see how else yahoo would make money.

Re:Yahoo has a monetization strategy (0)

Anonymous Coward | about a year and a half ago | (#43283873)

Agreed, and for sparrow, Google has always looked at buying things that provide good interfaces to its own content (Sparrow was a gmail client...) or things that replicate an active project (I'm looking at you Google Wave and Etherpad).

It is new world bribery and payouts (4, Interesting)

sebo2000 (2764273) | about a year and a half ago | (#43283625)

Father works for Morgan Stanly and Mother is some lawyer. People don’t you really see? It is new world bribery and payouts? Yahoo could write “similar” app for much less, but they do not really need it. Kid got 300k from some investors in the past, then raised another million from Li Ka Shing (look him up) Yahoo or whoever needs to pay, can not pay directly to Li Ka Shing any money to avoid audits and conflict of interest charges and lawsuits, so what they do? Pays the kid 30 millions for some stupid app, 29.5 goes to Li Ka Shing (main investor) the rest goes to the kid. Now those investors got paid off. Kid is in the media selling light of hope for all the losers dreaming about another face book, and all the messes and government have no clue what just happened. As they say if something looks stupid and ridicules probably it is.

No, we're in a government debt bubble (-1)

Anonymous Coward | about a year and a half ago | (#43283645)

A bubble whose side effect is governments seizing people's banking accounts to pay for bailouts [livetradingnews.com] .

Democrats have already floated the idea of taxing your 401K [foxnews.com] .

That's the bubble that can and will destroy the world economy.

IThis FP for GNAA (-1)

Anonymous Coward | about a year and a half ago | (#43283701)

of the found3rs of troubles of those

Sorry, Betteridge (1)

organgtool (966989) | about a year and a half ago | (#43283817)

This is one headline that I have to agree with, even if the article concludes the contrary. We are coming out of a period in which huge masses of the population were upgrading to smartphones and tablets. Many of those people have already purchased these items and the innovation in those areas seems to be slowing down. The current generation of these devices do just about everything anyone could need and there seems to be little room for improvement. There also doesn't seem to be much hype surrounding possible new tech products like there was leading up to smartphones and tablets. Given that mixed with the number of buyouts and mergers that are frequently indicative of a bubble, and I can't help but think that we are at least standing on another peak in the tech industry. Now if only there was a way to determine when everyone else will come to the same realization.

Recession quick grabs (0)

Anonymous Coward | about a year and a half ago | (#43283933)

Pretty much the title.

The recession hit a lot of companies and even to get sold they are having to cut a few numbers off the price or face death.

This is basically a Sunday Market for companies and services right now.
Equally for stock if you pick the right companies.

Of course, that is if the dollar doesn't collapse, the Eurozone crisis not becoming a catastrophe and North Korea not declaring war on everyone.
Those are looking like rather small nots though. Things are a wreck right now. Local currencies are being used far more in communities to get anything done and resources are nearing a crunch point, not to mention the crazier weather recently. (and that weather is going to get far worse as the year moves on...)
BRB, digging a mountain cave. You are all welcome to join me. But no woman. They scare me. We'll grow babies like in the Matrix, but use pigs instead. Or maybe rats. Yes.

No not a tech bubble... (1)

ZonkerWilliam (953437) | about a year and a half ago | (#43283959)

But a Federal Reserve bubble, money is cheap, so companies will spend it on somethings (but not as much as compared to a strong economy).

No (1)

closer2it (926190) | about a year and a half ago | (#43283975)

Not according to Betteridge Law [wikipedia.org] .

Oh... I see... nevermind then.

You really have to ask ? (1)

Wisp (1763) | about a year and a half ago | (#43284039)

If it walks like the last Duck.... ;)

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