Return to the madness of the dot-com bubble?

There were reports in the press last week that Twitter had been in talks with both Google and Facebook, with some estimates putting the value of the company at $10 billion. This follows the purchase of the online site the Huffington Post by AOL $315 million. There was talk that Facebook is now valued at $50 billion and Linked in announced its $175 million IPO (LinkedIn turned a profit of $10.1 million on revenue of $161 million in the first nine months of 2010, according to documents filed to the Securities and Exchange Commission).

AOL itself is infamous for the $164 billion merger with media group Time Warner completed In January 2000 at the height of the dot-com frenzy, which created AOL Time Warner. In 2002, the company was forced to report a loss of $99 billion due to the goodwill write-off related to AOL, at the time, the largest loss ever reported by a company. In 2003, the company dropped the "AOL" from its name, and removed Steve Case as executive chairman. In May 2009 Time Warner announced that it would spin off AOL as a separate independent company, with the change occurring on December 9, 2009.

Looks like we're heading for the day's of the 1998-2000 dot-com bubble all over again! (see my previous post on the anniversary of the bubble in March 2010 - http://contrarianinvestoruk.blogspot.com/2010/03/10th-anniversary-of-internet-bubble.html)

History of key Do-com busts from Wikipedia (http://en.wikipedia.org/wiki/Dot-com_bubble)

• Boo.com, spent $188 million in just six months^[17] in an attempt to create a global online fashion store. Went bankrupt in May 2000.^[18]
• Startups.com was the "ultimate dot-com startup." Went out of business in 2002.
• e.Digital Corporation (EDIG): Long term unprofitable OTCBB traded company founded in 1988 previously named Norris Communications. Changed its name to e.Digital in January 1999 when stock was at $0.06 level. The stock rose rapidly in 1999 and went from closing price of $2.91 on December 31, 1999 to intraday high of $24.50 on January 24, 2000. It quickly retraced and has traded between $0.07 and $0.165 in 2010 .^[19]
• Freeinternet.com – Filed for bankruptcy in October 2000, soon after canceling its IPO. At the time Freeinternet.com was the fifth largest ISP in the United States, with 3.2 million users.^[20] Famous for its mascot Baby Bob, the company lost $19 million in 1999 on revenues of less than $1 million.^[21][22]
• GeoCities, purchased by Yahoo! for $3.57 billion in January 1999. Yahoo! closed GeoCities on October 26, 2009.^[23]
• theGlobe.com – Was a social networking service, that went live in April 1995 and made headlines by going public on November 1998 and posting the largest first day gain of any IPO in history up to that date. The CEO became in 1999 a visible symbol of the excesses of dot-com millionaires.
• GovWorks.com – the doomed dot-com featured in the documentary film Startup.com.
• Hotmail – founder Sabeer Bhatia sold the company to Microsoft for $400 million;^[24] at that time Hotmail had 9 million members.^[25]
• open.com - Was a big software security producer, reseller and distributor, declared in bankruptcy in 2001.
• InfoSpace – In March 2000 this stock reached a price $1,305 per share,^[26] but by April 2001 its price had crashed down to $22 a share.^[26]
• lastminute.com, whose IPO in the U.K. coincided with the bursting of the bubble.
• The Learning Company, bought by Mattel in 1999 for $3.5 billion, sold for $27.3 million in 2000.^[27]
• Think Tools AG, one of the most extreme symptoms of the bubble in Europe: market valuation of CHF 2.5 billion in March 2000, no prospects of having a substantial product (investor deception), followed by a collapse.^[28]
• Xcelera.com, a Swedish investor in start-up technology firms.^[29] "greatest one-year rise of any exchange-listed stock in the history of Wall Street." ^[30