Discussion Question – CLO 7
Please read chapters 13 & 14 and answer the two following questions:
- During the early days of the Internet, most dot-coms were driven by revenues rather than profits. A large number were even driven by “hits” to their site rather than revenues. This all changed in early 2000, however, when the prices of unprofitable dot-com stocks plummeted on Wall Street. Most analysts have attributed this to a return to rationality, with investors focusing once again on fundamentals like earnings growth.
- Does this mean that, during the 1990s, dot-coms that focused on “hits” rather than revenues or profits had bad business plans? Explain. (Chapter13- Problem 14)
- During the dot-com era, mergers among some brokerage houses resulted in the acquiring firm paying a premium on the order of $100 for each of the acquired firm’s customers.
- Is there a business rationale for such a strategy?
- Do you think these circumstances are met in the brokerage business? Explain. (Chapter 13- Problem 17)
Managerial Economics & Business Strategy 9th Edition
By Michael Baye and Jeff Prince