Friday, June 18, 2010

AOL Punts Bebo For Next To Nothing

Need a lesson in how to incinerate $850 million in two years? Witness AOL's purchase, then pukage of Bebo. Let me summarize: pay a preposterous sum of money untethered to any sort of economic fundamentals to jump on the social networking bandwagon circa 2008. Can't get your hands on the first (Facebook?) or second tier (Myspace?) property? How about Bebo?! Ever heard of them? Nah, me neither. But I hear they are huge in the UK among 13-22 year olds. Seems those young British folk are fickle and now that they're all grown up to be 15-24, they've abandoned Bebo. In any event, now that the value of Bebo has become somewhat more crystalized, AOL has punted the social networking mini for a realistic, yet "undisclosed" value. Those in the know claim it is far less than $10 million. Far less than Ten = Closer to Zero.

This kind of loss would be embarrassing for most companies, but probably not so much for AOL which set the standard for money punting ten years ago in its historic purchase of Time Warner, which wound up costing shareholders $100 billion or so. Everybody was too busy day trading internet stocks like they were going out of style (and they were!) to count.

In any event, everybody needs a good tax break, even AOL, which will receive a deferred tax benefit in the second quarter of $275-$325 million. The good news is that somebody got rich in the meantime, namely the founder of Bebo, who reportedly paid the highest price ever paid for a single family home in San Francisco. It's always nice when you can sell the high so you can afford to pay the high.

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