Public Hosting Company Valuations Get Crushed
If you missed it, the U.S. stock market (along with the rest of the world markets) has been dropping like a rock. To put a bit of perspective on the state of affairs consider this:
The venerable and respected investment bank known as Lehman Brothers which had been in existence for 158 years has gone bankrupt. The former CEO has been facing a Congressional hearing into whether or not the company misappropriated funds in the days leading up to the collapse.
The Dow Jones Industrial Average fell below 10,000 yesterday. How low is that? The first time the index crossed 10,000 was back in 1999. So if you had invested $1,000 in the Dow Jones Industrial Average stocks in 1999 and waited almost 10 years until today - you would have earned nothing.
If you need further detail on the abysmal state of the financial markets you can visit any major news outlet or financial website. The particular sector that interests me at this time are those companies involved in web hosting. In the publicly traded markets there are two firms that are pretty much web hosting ‘pure plays’. That is, their entire business is built around only web hosting-related business activities: Web.com (ticker symbol WWWW) and Rackspace (ticker symbol RAX).
So how have the web hosting companies been fairing over the past month? Terrible.
For comparison’s sake, let’s sat that you had a bunch of money to invest 1 month ago. Here is how much you would have lost in each of the following investments:
Microsoft - you would have lost 2.9 percent in the past month.
Dow Jones Industrial Average - lost you 11.3 percent.
Google - sorry, you lost 16.4 percent in the past month.
The Nasdaq - loser to the tune of 17.4 percent.
Which now brings us to the web hosting companies. If you had the inclination to invest in Web.com or Rackspace over the past month, here is how you faired:
Web.com - you would have lost a staggering 30 percent of your money.
Rackspace - are you sitting down? Good, because your investment has shrunk by one third. You lost 33 percent of your money in one month. Ouch.
Not to belabor the point, but consider the overall valuations of Web.com and Rackspace.
On September 5, 2008 Rackspace was worth around $1.2 billion. On October 6, 2008 it was worth $851 million. That’s a loss of over $400 million.
On September 5, 2008 Web.com was worth $167 million. On October 6, 2008 it was worth $117 million. That’s a loss of $50 million.
That makes me think of what I could do with $450 million. Let’s hope that the downturn on Wall Street and the blood bath in the web hosting sector let up soon. If they don’t, I’m not sure you’d want to invest in web hosting for the next month.
This content was written by Derek Vaughan and is provided courtesy of the VPS and dedicated hosting experts at HostMySite.com.
