1. 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)
2. 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
Explanation & Answer length: 3 pages
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