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.
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.