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Tech Bubble Redux

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by Felix Salmon
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May 18 2007 12:00am EDT

Tech Bubble Redux

The one silver lining for Microsoft, when Google bought DoubleClick for $3 billion a month ago, was that Google was suffering from the winner's curse, and paid way too much for the internet advertising company. Naturally, then, it took Redmond's best and brightest only a few short weeks to manage to spend $6 billion on their own internet advertising company, aQuantive.

Dana Cimilluca notes today that the deal leaves Citigroup analyst Mark Mahaney with a huge amount of egg on his face. He downgraded aQuantive at the end of April, when it was trading at just over $30 per share, saying that the best-case scenario for the company gave it an upside of no more than 14%. (And remember, this was after the DoubleClick deal.) Oops. Microsoft's paying $66.50 per share.

Mahaney's problem is not that he doesn't know how to value a company; it's that he does know how to value a company. But web and tech companies aren't changing hands based on rational valuations these days. Truly, the happy days are here again.

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