patrick.net

its not just about how many of the companies survive. But also how many millionaires are made in the process.

If I made a few million in the Facebook IPO I wouldn't hesitate to buy a house in the nicest part of town.
For cash.
Also in the penninsula we have this problem with land constraints.
Pretty soon average 9-5 day workers wont be able to afford a house unless you move somewhere like Pleasanton.

Same thing happened in NYC, where they also dont make any real products.

if you're lumping google in with twitter i claim you can't tell a good tech company with a solid business from a tech company that sells vaporware. those two companies are worlds apart.

At least the employees are well feeded! That should free up some cash to pay for the albatrhouse!

It's actually pretty incredible that almost all the social media webex companies I use regularly are based in San Francisco Bay Area. Facebook, Twitter, Zynga, Pandora, Yelp, Linkedin, etc. The bay area represents about 2% of the population but 75% of the market cap of this industry.

You have a very limited view of what is a real product. Semi conductor has razor thin profit margins and worst whatever cash generated has to be plowed back even more significanly into capital investment. Zynga on the other hand generates tremendous margins and is a cash generation machine who don't need to chase investment capital to improve. Producing a service is a viable product and true strengh of the US. IBM is out of the real products industry for the much more profitable service for the same reason. Employees have more job security here than any sem-conductor outfit.

While not public, market price can be established nevertheless. For example, if twitter raised 200M in exchange for 10% of the shares, they are worth approximately 2B then. from this measurement, Faceook is worth an estimated 40B currently. A signicant chnage from before is these companies can grow without going public. In semiconducor, there is no chance a company can grow without public $$.

While not fully secured, these web companies spend tremendous effort to protect their site. You think management don't know these things. For example, after years of effort, Amazon.com is nearly impentrable and their website will be open for business. Facebook, Twitter, etc. will function the same way.

SF ace says

While not public, market price can be established nevertheless. For example, if twitter raised 200M in exchange for 10% of the shares, they are worth approximately 2B then. from this measurement, Faceook is worth an estimated 40B currently. A signicant chnage from before is these companies can grow without going public. In semiconducor, there is no chance a company can grow without public $$.

Show me the audited financial statement of the above companies BEFORE discussing what a company so called valuations.

MSFT infusion of $400M into FB inflated the equity making FB too steep as buyout
As for Twitter and FB high valuations only sinks them with heavy deferred compensation expense (noncash FAS 123r) making it not profitable for years to come.

You have to expense the FV of these companies high valuations for years down the road.
$200M or $400M is pocket change for the investors like MSFT who funded these operations.

Intel like many other Semis in the 80s, without global competition from Japan, made products whose worth was MORE than its weight in GOLD. Expansion was based on keeping its prices relatively high during an era of high demand.

These are just web companies, no real product like intel, apple, microsoft, cisco etc.

The difference is capital investments by corporate customers for traditional 'real' SV products vs advertising dollars. CI is a long term comitment vs fleeting ad dollars which are short term.

Can ad dollars crash... see whats left of Madison Avenue

dont buy now because there might be a power outage that collapses facebook.

I think that's the first time I've heard that one.

E-man says

believe valuation of a company has nothing to do with its financial statement. It has more to do with the company’s potential, and what others are willing to pay for it. Kind of like Ebay paid an arm and 3 legs for Skype, and many other acquisitions

you can add Arm and a leg what SUN paid for MySQL.. Billions. And had to take a half bill hit to earnings.

In either case as current FASB requires, prepared by management, reviewed by Auditors, and enforced by the SEC every year is the test for that overpayment (Goodwill impairment). And as was the case with Ebay had to take a 1.4 billion hit to earnings, tested by applying undiscounted cash flow from operations of acquisition. All because some meat head in Marketing over exaggerated the "acquisition potential". What remained had to be sold off.

eBay Beats the Numbers Despite Skype Writedown
Posted by: Rob Hof on October 17, 2007
No surprise that eBay logged a third-quarter loss thanks to its $1.4 billion writedown on its $4.1 billion Skype acquisition in 2005.

ITS Sushi nite .... ummm goood!

toothfairy says

its not just about how many of the companies survive. But also how many millionaires are made in the process.
If I made a few million in the Facebook IPO I wouldn’t hesitate to buy a house in the nicest part of town.

I don't consider myself rich nor do I know anyone who is rich well, but what I do know is that: 1) I work for them and they give me money in return and 2) they also give money (but this time for free) to their not-so-rich children, relatives, friends, and acquaintances to buy houses.

Based on what I am seeing and hearing, I would estimate that out of every three decent SFH bought in bay area, two have received some sort of "free money" or "help" . When it comes to buying houses, there is a huge free money trickle-down effect that inflates the price of houses.

There are 7 Million people in the BayArea.

There are around 100,000 who work in tech.

It is a myth that BA real estate is propped up by tech salaries.

thomaswong.1986 says

E-man says

believe valuation of a company has nothing to do with its financial statement. It has more to do with the company’s potential, and what others are willing to pay for it. Kind of like Ebay paid an arm and 3 legs for Skype, and many other acquisitions

you can add Arm and a leg what SUN paid for MySQL.. Billions. And had to take a half bill hit to earnings.
In either case as current FASB requires, prepared by management, reviewed by Auditors, and enforced by the SEC every year is the test for that overpayment (Goodwill impairment). And as was the case with Ebay had to take a 1.4 billion hit to earnings, tested by applying undiscounted cash flow from operations of acquisition. All because some meat head in Marketing over exaggerated the “acquisition potential”. What remained had to be sold off.
eBay Beats the Numbers Despite Skype Writedown
Posted by: Rob Hof on October 17, 2007
No surprise that eBay logged a third-quarter loss thanks to its $1.4 billion writedown on its $4.1 billion Skype acquisition in 2005.
ITS Sushi nite …. ummm goood!

There are skypes and there are paypals. Sure companies can overpay but they can underpay as well. In this case eBay committed both.

How many of these tech employees already own homes before they got rich off options?

And wer'nt there tech companies before the bubble?

Serpentor says

And wer’nt there tech companies before the bubble?

Yes there were. And they were staffed by Americans who had a different logic about housing costs, living standards, and the value of a "public" K-12 with a high API score than those buyers who set Fortress prices nowadays.

And what there wasn't in those days, was new wealth overseas, and the H-1 program.

In The Fortress, it is different now.

sybrib says

Serpentor says
Yes there were. And they were staffed by Americans who had a different logic about housing costs, living standards, and the value of a “public” K-12 with a high API score than those buyers who set Fortress prices nowadays.

Oh so sad, the good old days are gone.

And what there wasn’t in those days, was new wealth overseas, and the H-1 program.
In The Fortress, it is different now.

Ya, if nothing else blame it on the immigrants.

sybrib says

Yes there were. And they were staffed by Americans who had a different logic about housing costs, living standards, and the value of a “public” K-12 with a high API score than those buyers who set Fortress prices nowadays.
And what there wasn’t in those days, was new wealth overseas, and the H-1 program.

You cannot walk out of China with luggage stuffed full of dollars or yuan. Its equally impossible to wire money out as well. The Chinese central bank has way too many controls over transfers out. They simple dont allow it. They shoot people in China for doing just that.

H-1 have little meaning considering employers simply set up a foreign branch to handle R&D, Shared services operations, and other tasks. And they are doing that today. Small and big employers its being done as we speak. We already have lost many many jobs over this. So its not H-1 you should be worried about. H-1 is a weak agrument. Look at the bigger picture and the operations of local companies, it says a lot more you are unaware of.

OK. so you have a foreigner who comes here, with spouse and rug rats. Chances are equal one or both have been laid off. And so goes their dual incomes to support fortress prices.

So the argument does meet reality!

sybrib says

Serpentor says

And wer’nt there tech companies before the bubble?

Yes there were. And they were staffed by Americans who had a different logic about housing costs, living standards, and the value of a “public” K-12 with a high API score than those buyers who set Fortress prices nowadays.
And what there wasn’t in those days, was new wealth overseas, and the H-1 program.
In The Fortress, it is different now.

yep, as expected, the broken record speaks again.

for someone who (by your own admission):
1. is not an immigrant,
2. who's only experience with them is interaction with his coworkers
3. doesn't live in the "fortress" areas and didn't grow up there.
you really should not be speaking as an expert about them.

you should really listen to some people here who actually lived the life of an immigrant and grew up with them before making these broad assumptions.
its already been established that you can't take money out of China, billionaire commie families don't all want to move to the Bay area, most immigrants here are middle class hardworking families, and they don't all make perfect financial decisions.

please, don't pretend to be a Chindian expert when your only experience with them is superficial business relationships.

Thomas,

Of course you have to be wealthy to buy in The Fortress, or to make a downpayment in The Fortress, to qualify to borrow for The Fortress, to pay the property taxes on recent purchases in The Fortress. Those prices are high and only the wealthy qualify.

Yes they are wealthy by any reasonable standards of wealthy. Just ask the folks from rural places in the countries that they immigrated from, or just ask the worker bees in the Bay Area who clean the toilets in the office buildings that they work in, or change the oil in their cars, or cook their restaurant meals for them. They are wealthy. If they got a university education in their countries and then another one in the USA, those educations are the perks of privilege.

Maybe Serpentor doesn't think that they are wealthy, because he is not viewing them from the perspective of the regular folks like I mentioned.

They are wealthy and they are applying Their Own Arithmetic to Their Own Valuation of a Fortress Residence. They are not just paying for housing when they live there. They are also paying for tuition to a public K-12 with an elite API score. If they "buy" instead of renting, they are "locking-in" that "tuition" cost. More than one Wealthy Immigrant Fortress Buyer has explained this Arithmetic to me.

alpo says

Ya, if nothing else blame it on the immigrants.

Credit, not blame.
Their ethic, imposed upon their own kids, is also boosting (boasting?- funny how one letter can change the meaning, -or maybe not) the "quality" of the public schools, based on API scores.

Sybrib, please stop talking out of your ass. You're not an immigrant, you don't know them, your superficial knowledge of them doesn't mean you can speak for them.

You've since backed away from your position that they have unlimited wealth, now that you are saying they are willing to bankrupt themselves to be in a "fortress"? hahaa ok.

Ok let me call all my family and all their friends and ask them if that is the case. Nope, most of them bought before the bubble after saving up, some are renting, others bought during the bubble and is struggling... sounds familiar? yep they are just like non-immigrants. Yes we value eduction but we also are subject to laws of the real world. I've been listing to Chinese language financial radio recently and the overall caller sentiments are not much different then non-immigrants and range from apprehension, pessimistic, optimism to despair.

Serpentor says

your position that they have unlimited wealth,

Never wrote that.

New wealth over there, yes. Investing the new wealth in putting their kids into the best schools in their countries, - wouldn't you? Tech engineers wealthy? Certainly are compared to nearly everyone else, in the Bay Region, in California, in the world.

I never wrote that they (immigrant Fortress buyers) have "unlimited wealth". I have often referred to their value system for house prices, as they have explained it to me, so many times. Doesn't mean all immigrants agree with That Arithmetic, I never did say that all of them do. Just the subset ones who buy-into That Arithmetic do, and "they" execute on it. And I know wealthy immigrant renters who aspire to be new Fortress Homeowners, probably you do too.

You might even be one yourself.

Serpentor says

value eduction

Don't think I ever used that word, education in reference to Fortress K-12. High API scores, yes. Not the same thing as education. Just ask a K-12 teacher.

stop playing games with words. you know what you meant. I really don't get your obsession with the Chindians in fortresses. By your admission you don't live in the fortress, and you're not a Chindian why do you keep speaking for them?

let me guess. Realtor

Totally agree with sybrib as I rent in a fortress, from a Chindian, and live across the street from a 3rd grade teacher at the high api fortress school. It is exactly as you say, as the teacher says her demographic has changed drastically in the last 2-3 years (she has been there for over 15 years), and with it came a long list of challenges.

Through tax records, I have seen the names of the recent buyers in the fortress areas, and Smith and Jones are not among them.

avpmenlo, nobody is disputing that demographics has changed. Any jackass driving down Stevens Creek Blvd can see that. In my neice's Cupertino class, there's ONE white kid and he gets picked on by the other kids. What does that have to do with real estate prices? Immigrants are not immune to economic forces, they don't have mystical gold egg laying dragons in their basements.

avpmenlo says

It is exactly as you say, as the teacher says her demographic has changed drastically in the last 2-3 years (she has been there for over 15 years), and with it came a long list of challenges.

Ya and if you can't blame the immigrants for whatever it is that you want to blame them for, blame the immigrant children. They are much easier target than immigrants I guess.

Serpentor, you are right, they do not have access to golden eggs, but they do have access to stock options. A friend of mine is in charge of a new division at ebay, which just hired 103 new employees, not one white, mind you, and 30 from out of the country in which they will be relocating to the bay area. Every one of them indicated Palo Alto, Menlo Park, and Los Altos as where they will be searching for homes because of the school districts. They all were hired in the 300-400K annual salary and will be/are arriving with in the next few weeks. They have plenty to put down, and can close quickly.

That is what the changed demographic has to do with real estate prices in fortress areas.

alpo, the challenges were not with the children, but with the parents of the children. They have resumes for their 7 year old, and do not allow their children to have a life outside of academics. They have also had more problems with cheating than ever before, catching many PARENTS trying to find answers to tests. And many of them do not attend/support school fundraising or events which proves difficult during budget cuts.

We had a dinner party and debated all this for hours...I too used to think there was no negetive impact to the changes, but these collegues changed my mind.

yeah as I expected, more stories and anecdotes but no real data to back that up.
Ah yes, the old stock option argument. Most of the people in management are still dominated by the white elites and people that immigrated decades ago. Stock options earnings are far lower on average then the hay days of dotcom thanks to new accounting rules. How many companies went public the last few years?

every story you can come up with of high income relocating here to the fortress, I can counter with many of companies going under the last year or two.

all these arguments are old and tired and have been rehashed 1000 times here.

actually It's more about the acquisitions these days rather than IPOs.

my stock options are worthless.

Companies like to bring worker in on Visa's because they work for less than local talent. They are pretty much slaves too because without a sponsor they are gone.

toothfairy says

actually It’s more about the acquisitions these days rather than IPOs.

yeah, quality companies get acquired for cheap these days because its really hard to raise capital these days. Marginal companies close down because the funding situation has dried up. no more free candy.

inflection point says

my stock options are worthless.
Companies like to bring worker in on Visa’s because they work for less than local talent. They are pretty much slaves too because without a sponsor they are gone.

a great point to stress: recent immigrants are basically indentured servants because they are working for the green card. Their pay is marginally less then Americans with similar experience because the extra expense companies have to go though for immigration paper work.

avpmenlo says

Every one of them indicated Palo Alto, Menlo Park, and Los Altos as where they will be searching for homes because of the school districts.

Immigrants, even highly skilled once (including those from "white" Europe) prefer to rent apartments rather than buy homes. Usually, it takes around five years for an immigrant to get into the housing market once they start working here in Silicon Valley.

They all were hired in the 300-400K annual salary.

Bullshit.

That is what the changed demographic has to do with real estate prices in fortress areas.

False assumptions, false conclusions :-)

alpo, the challenges were not with the children, but with the parents of the children. They have resumes for their 7 year old, and do not allow their children to have a life outside of academics.

Certainly, if you are not comfortable with "non-whites" these will appear to be as challenges.

They have also had more problems with cheating than ever before, catching many PARENTS trying to find answers to tests. And many of them do not attend/support school fundraising or events which proves difficult during budget cuts.

Since when were immigrants to this country expected to be "saints" right from the day when the first white European with his gun met the first native American?

We had a dinner party and debated all this for hours…I too used to think there was no negetive impact to the changes, but these collegues changed my mind.

Seems like a nice bitching session to me. Were there any true blooded native Americans there? :-). But yes, I would agree that there are many immigrants who although have moved to another country still want to live as if they are in their little village back home.

avpmenlo says

challenges were not with the children, but with the parents of the children. They have resumes for their 7 year old, ...They have also had more problems with cheating than ever before, catching many PARENTS trying to find answers to tests.

http://articles.sfgate.com/1997-05-23/news/17749890_1_cheating-scheme-top-test-scores-advanced-placement
http://www.metroactive.com/papers/metro/02.19.04/saratoga-0408.html