Rupert Murdoch Punctures Internet Euphoria

Strategic Insights -

Rupert Murdoch, the head of News Corporation, brought a reality check to the rising optimism surrounding internet stocks, warning that many new companies in the industry are heavily overvalued and unlikely to meet profit projections. His remarks came as internet stocks in New York experienced a rare dip, following a prolonged rally where shares in companies like Yahoo!, America Online, and Amazon.com had risen more than 10% daily. Murdoch's skepticism will fuel the growing debate about the valuation of internet companies, especially those unlikely to produce profits in the short term.

Key Takeaways:

  • Rupert Murdoch, News Corporation's head, expressed skepticism about the projected growth of internet companies, warning that they are heavily overvalued and unlikely to meet profit projections.
  • His comments came as internet stocks in New York experienced a rare dip, with shares in companies like Yahoo!, America Online, and Amazon.com falling after a prolonged rally.
  • Murdoch highlighted that News Corp would not be making takeovers of large or already over-capitalized companies, and emphasized that the internet was not a "death-knell" for traditional media companies.
  • He noted that internet companies, such as AOL, would coexist with traditional media companies like television and radio, but would "wiping out the middlemen" in transactions.
  • Murdoch's remarks were also seen as a criticism of companies like Bertelsmann, which has stakes in AOL and barnesandnoble.com.
  • The remarks will likely fuel the debate about the valuation of internet companies, particularly those that are unlikely to produce profits in the short term.
  • The statement was made in Singapore, where Murdoch spoke about News Corp's ambitions in Asia, including showing news programs on its television networks like Star TV.

Statistics:

  • Shares in Yahoo! fell $10.5 to $404 in early New York trading.
  • AOL's shares dropped $5 to $160 after the dip.
  • Amazon.com's shares fell $16.625 at $168.
  • The market valuation of AOL recently exceeded that of Walt Disney, the US media company.

Sources:

  • "Internet euphoria punctured by Murdoch." Lex, Page 24, World stocks, Page 44.