are doomed to something, something, something, right?
I read this quote today from March of 2002 and had to laugh at the parallels with today's world. Today Twitter sells at 18 times earnings (again, that's a product I like, but the stock is another story) and a start-up with no meaningful path to revenues - let alone earnings - raised $150 million at a $2.3 billion valuation. This company - Houzz.com - is sort of a mashup between pinterest and architectural digest and I've used it a few times just to get an idea for a project, but $2.3 billion?!?!? That's crazy talk.
Here is Sun Microsystems former CEO speaking in 2002 after the dotcom bubble burst about his stock price in 2000.
"But two years ago we were selling at 10 times revenues when we were at $64.
At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends.
That assumes I have zero cost of goods sold, which is very hard for a computer company.
That assumes zero expenses, which is really hard with 39,000 employees.
That assumes I pay no taxes, which is very hard.
And that assumes you pay no taxes on your dividends, which is kind of illegal.
And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate.
Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? "
"You've got to ask yourself a question. Do I feel lucky? Well, do ya, punk??"