Do you remember a few years ago, in 2004 when a young little known company named Google decided to become public through an IPO. It generated a lot of interest with users racing to buy shares. The shares were offered at an auction and the final IPO price was 85$USD. To many, it seemed like a major bargain. But to others, the 85$USD was silly for a company that showed little ability to generate income.

The first day the stock actually traded, August 19th 2004, it actually jumped about 20% and finished over 100$. After that, it never looked back. Sure Google did not always rise and did have some tougher moments. But overall, it is still a dream for most investors. Every stock is now worth close to 600$ and there is still a lot growth with UBS releasing a 700$ target price just yesterday.

So the question of course now is how to find the next one. The three main names being mentionned so far have been Facebook, Twitter and Linkedin. All 3 companies are rumored to be thinking about going public. When I talk about going public, it means that their shares can be purchased on the stock exchange. But as a sidenote, there are already ways to buy some shares, from those lucky ones who own shares already (either privaate investors or employees generally). Secondmarket and SharesPost are two of the companies that already offer this possibility.

Over the next 3 weeks, we will go into a little more detail into the current valuation of the three internet companies.  Facebook has been the most talked about one as its owner has even confirmed that at “some point”, Facebook will certainly be going public. There have also been more rounds of funding and recent transactions have set the value of a share at 21$, thus putting the company value at $9.5B!!!

Too high? I’ll give my view on that next week but let’s just say that I remember a lot of investors thinking it was crazy to pay 85$ for a share of Google.  So don’t dismiss the IPO too quickly.

As you know, I do trades mainly in the technology field and I do have a screen that helps me follow the action for 20-25 companies that I trade on. Over the past few years, Yahoo has been one of the more interesting names to trade for a few reasons:

-It is in the very dynamic search industry

-It competes with tech companies such as Google, Microsoft and IAC Interactive.

-It is fairly easy to get indications of market share for Yahoo as well as get a good idea what kind of revenues the company is pulling in

-There was also a lot of speculation about the stock and the discussions Microsoft had to buy the company. As well, Yahoo has always been a content company. While search has been its main focus, it still generates a decent amount of traffic through all of its content properties.

But since Yahoo did its search deal with Microsoft, I simply have been unable to get a clear view on the company. It is unclear to me what Yahoo’s core now represents. It would not be search as it has basically given up on that in order to help Microsoft’s Bing. But is Yahoo’s profitability now linked so much to Microsoft that I should consider Bing’s recent signs of success over Google as a positive for Yahoo? I doubt it strongly. In my opinion, Microsoft is the major winner here, not Yahoo!.

So Yahoo has been refocusing and most of what we’ve heard has been centered on cost cutting. That is great and will certainly help profits in the short term, but how much costs can Yahoo cut? And in a technology company, I would expect profits to be driven by rising revenues, not dropping costs.

Many of Yahoo’s properties are not showing growth. While it used to be the leader in finances, dating, email, sports, it is no longer in all of these categories. It just seems as though Yahoo was involved in so many areas that it stopped improving its page or at least did not do so at the speed of its competitors. Because of that, Yahoo has been losing ground in almost all of its markets/properties.