The Phaserl


‘This Market is Driven by Psychology and Momentum,’ which ‘Works Really Painfully on the Way Down’

from Wolf Street:

Google is symptomatic for the expenses-be-damned attitude in parts of Silicon Valley. Afterhours on Thursday, it reported that revenues grew 20% to $16.5 billion. But its operating expenses soared 28% to $12.8 billion. Operating income declined 1%. And net income dropped 5.3% to $2.8 billion. Expenses do matter.

The nearly unlimited open wallets of Google, Facebook, and other mastodons in this neck of the woods sustain the startup bubble with its crazy valuations and reckless cash burn rates. A corporate buyout is one way of how startup investors exchange these crazy valuations for other people’s real money. But corporations get notoriously stingy and unwilling to blow cash or shares out the door when the ground under their foundations is shaking. IPOs are the other way of converting crazy valuations into other people’s real money. And they too need a booming stock market.

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