Reality Bites: Silicon Valley Firms Can Lose Tens of Billions in Value
About 10 days ago, Google CEO Eric Schmidt opined in a press conference about the growing financial crisis: “My guess is that the drama is in New York and not here.”
Bad guess, as it turned out. Really bad guess, actually.
Yesterday, Google (GOOG) –one of many tech companies hammered after the House rejected the bailout plan to revive the economy–got slammed badly, along with Yahoo (YHOO), Microsoft (MSFT), Apple (AAPL) and many others.
And, just like that, tens of billions of dollars in shareholder value were lost in the Wall Street meltdown.
Today, most of those stocks made back a lot of what they gave up as the markets took a break from heedless panic and replaced it with worrisome hand-wringing while putting their hopes on some sort of Congressional action (as if business-impaired politicians could actually be the saviors of the situation).
But the experience should have given Silicon Valley a bracing wake-up call that it is in no way immune to the situation and that its businesses will likely suffer along with media and all sorts of other consumer companies if the credit crunch is not assuaged relatively soon.
While I predict the third-quarter results–coming in the next few weeks–for tech and Internet firms will be a lot better than analysts are expecting right now, the fourth quarter will be decidedly glum, especially for most companies dependent on advertising of some sort for their business.
“I have never seen it this depressing,” said one major exec at a Web property to me about trying to sell advertising online in this bleak environment, just as the medium has been getting increasing uptake.
And, while it is by no means Armageddon, and trends over time clearly point to online and away from traditional media, it is also not a time to be blithe.
In the same press conference, Google’s Schmidt noted: “It’s business as usual at Google.”
Even for the mighty Google right now: As if.
Please see this disclosure related to me and Google.