Tech Bubble Redux

The one silver lining for Microsoft, when Google bought DoubleClick for $3

billion a month ago, was that Google was suffering from the winner’s

curse, and paid way too much for the internet advertising company. Naturally,

then, it took Redmond’s best and brightest only a few short weeks to manage

to spend

$6 billion on their own internet advertising company, aQuantive.


Cimilluca notes today that the deal leaves Citigroup analyst Mark

Mahaney with a huge amount of egg on his face. He downgraded

aQuantive at the end of April, when it was trading at just over $30 per share,

saying that the best-case scenario for the company gave it an upside of no more

than 14%. (And remember, this was after the DoubleClick deal.) Oops.

Microsoft’s paying $66.50 per share.

Mahaney’s problem is not that he doesn’t know how to value a company; it’s

that he does know how to value a company. But web and tech companies

aren’t changing hands based on rational valuations these days. Truly, the happy

days are here again.

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