Are we facing another tech bubble?

Marketplace Staff Mar 28, 2011
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Are we facing another tech bubble?

Marketplace Staff Mar 28, 2011
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STEVE CHIOTAKIS: There are a handful of dot-coms and Silicon Valley firms, social networks too. And they’re worth a lot of money. Twitter and Groupon, $4 billion-plus each. Zynga, $10 billion. Not to mention the behemoth Facebook. Yeah, we’ve been down this road before with supposed tech giants and that bubble burst in 1999. A lot of companies and people went bust. So with today’s tech company valuations even bigger than those days, are we seeing another tech bubble in the making?

Dean Takahashi is a writer for VentureBeat and he joins us now from Silicon Valley with the latest. Good morning.

DEAN TAKAHASHI: Good morning.

CHIOTAKIS: So are we seeing a new tech bubble here?

TAKAHASHI: We have something more like a narrow bubble for a small number of companies. There’s five companies that are really valued outrageously high, like Facebook, LinkedIn, Groupon, Zynga and Twitter. The rest of the companies out here aren’t quite so lucky, and in fact, in Silicon Valley, the unemployment rate is still around 10.3 percent. Back in 1999 when we really did have a broad based bubble, the unemployment rate was about 2.2 percent.

CHIOTAKIS: What are we watching out for? Like, what are we being careful about?

TAKAHASHI: Well, I guess those five companies I’ve mentioned have seen their valuations run up very fast in the last two years.

CHIOTAKIS: Like Facebook at $50 billion, right?

TAKAHASHI: Yeah. So it’s like five times what it was worth two years ago. And they have no grown their revenues and earnings at that same rate, and so the good thing about this relatively narrow bubble is that they are all very nicely profitable. I mean Twitter maybe not, but most of these companies are profitable at making real revenues, where as there is a lot of vapor back in 1999.

CHIOTAKIS: Dean Takahashi, writer for VentureBeat, thanks.

TAKAHASHI: Thank you.

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