Bubble, what bubble?
Everything was copacetic with the monied tech crowd at The Wall Street Journal's D: All Things Digital Conference at a resort in sunny Rancho Palos Verdes, Calif., last week.
Few presenters even mentioned that tech, especially social-media companies, might be in a valuation bubble despite the $7.45 billion market capitalization for recently public LinkedIn (LNKD)
For his part, venture capitalist and Netscape co-founder Marc Andreessen, who seems to be having the time of his life, applied contrarian psychology to the bubble question. "A bunch of people think there's a bubble, so, therefore, we think it is not," Andreessen posited. "If everybody's euphoric, then I'm concerned. If we're back here in three years and nothing's changed and nobody's worried, I'll be horrified. I'll wet my pants on stage," Andreessen said.
Indeed, Andreessen went on a tirade about how low the price/earnings ratios for the tech behemoths are. Microsoft (MSFT)
Then how does one explain the LinkedIn valuation? "As an angel investor [in LinkedIn], I'm biased. It has a thin float, the market is starved for growth, [and] you can't even borrow shares to sell LinkedIn short yet," Andreessen mused. But "it is a powerful and important company doing an important thing. The problem is that there is no other [tech stock] like it . For the first time in history, we have an equity bubble affecting one stock," he said.
There is that B-word again. One inflated social-media company does not a bubble make that's what he appeared to be saying. As for the frothy secondary markets, which have allowed still-private companies such as Facebook to let employees sell shares without going public, Andreessen said the jury is still out. He added that LinkedIn's IPO is valued at about four times the company's private-market valuation, "but it is hard to draw any conclusions yet."
Andreessen and partner Ben Horowitz have raised about $1.3 billion in their venture fund for their firm, Andreessen Horowitz. Sometimes, Andreessen acts as an angel investor on his own, sometimes he buys stakes through the fund, and sometimes he does both. So he has pieces of some of the hottest social-media plays in the IPO queue, including Groupon, Zynga and Facebook.
Groupon's chief executive, Andrew Mason, was very disciplined in not answering questions about IPO plans at the conference because, as it turned out, less than 24 hours later, his company filed to go public. One of the catalysts for the hasty filing may have been Google's (GOOG)
GOOGLE'S SCHMIDT, who kicked off this year's proceedings, made a macro observation that resonated throughout the conference. Schmidt opined that there are four technology companies that have "exploding-platform strategies": Apple (AAPL),
One CEO who doesn't seem to make many mistakes is Netflix (NFLX)