Charles, I think that you and Jerry are both right and wrong. The real issue is not valuations, but rather what makes companies truly valuable, over time, in the market?
The answer is competitive advantage backed up by some type of proprietary technology, barrier(s) to entry (for potential competitors), superior distribution, and/or superior access to capital (either in cash or stock).
While the Yahoos, Pricelines, Ebays, AOLs and Amazons of the world have a clear competitive advantage (first to the party), they (in my opinion) lack the backup to sustain that advantage. Their models do not offer anything that cannot be easily duplicated (with capital).
The DELLs, CSCOs, SUNWs, and INTCs of the world all have some sort of backup to continue to drive their unit and market share growth. DELL relies on superior manufacturing and distribution models (while they may be duplicated, have not been as of yet with any real success), while the the others have some sort of proprietary technological advantage. These are the things creating real value.
As for high valuations, who knows how high is really high. All I can say is hedge your bets if you're concerned.
I, for one, am not going to harken back to 1929 and bury my head in the sand...
Regards,
LoD |
