Facebook Hype? Here Are 10 Tech Companies That Are More Profitable Than Facebook
Facebook's IPO is set to debut sometime next week, maybe Monday, and boy are people excited about it. Understandably so: What company better represents the world of social media? Or can even compare in hype?
As far as time-wasters and user-friendly stalker services go, Facebook is king of the Internet. And like true royalty, the tabloids are littered with speculation. Here's what the rumor mill has established so far:
- Facebook's IPO valuation is expected to be somewhere between $75 billion and $100 billion.
- Reports suggest Facebook's 2011 revenues -- mostly advertisements -- came in around $4 billion.
- CNBC Julie Boorstein recently tweeted, "Sources tell me Facebook's 2011 revenue was $3.8B, operating profit around $1.5B." This leaked information is basically in line with several reports heard in late 2011.
But we were thinking, with an operating margin of 39.74% (operating profit / revenue = 1.5B / 3.8B = 39.47%) is Facebook really worth a $100 billion valuation?
For those who need a reminder, a company's operating margin tells us the percentage of revenues remaining after all operating expenses are paid. Operating expenses include supplies, wages, repairs, research and development, and depreciation.
If Facebook has a 39.47% operating margin, it means it actually makes $0.3947 (before interest and taxes) for every dollar of sales.
This isn't bad, but it isn't great either.
Business section: Investing ideas
With that in mind, we wanted to identify a list of tech companies with higher operating margins than Facebook. These companies are not valued at $100 billion and above, so why is Facebook?
List sorted by operating margin. (Click here to access free, interactive tools to analyze these ideas.)
1. Changyou.com (NAS: CYOU) : Develops and operates online games in the People's Republic of China. Operating margin at 57.94%.
2. Check Point Software Technologies: Develops, markets, and supports a range of software, and combined hardware and software products and services for information technology (IT) security applications worldwide. Operating margin at 56.17%.
3. Baidu (NAS: BIDU) : Provides Internet search services. Operating margin at 52.53%.
4. Linear Technology: Designs, manufactures, and markets a line of linear integrated circuits. Operating margin at 48.27%.
5. InterDigital (NAS: IDCC) : Engages in the design and development of digital wireless technology solutions. Operating margin at 47.78%.
6. Hittite Microwave (NAS: HITT) : Designs and develops integrated circuits, modules, and subsystems for technically demanding radio-frequency, microwave, and millimeter-wave applications. Operating margin at 47.77%.
7. NetEase.com: Engages in the development of applications, services, and other technologies for the Internet in China. Operating margin at 46.77%.
8. Dolby Laboratories (NYS: DLB) : Develops and delivers products and technologies for the entertainment industry worldwide. Operating margin at 44.97%.
9. SolarWinds: Designs, develops, markets, sells, and supports enterprise information technology (IT) infrastructure management software to IT professionals. Operating margin at 43.25%.
10. VeriSign: Provides Internet infrastructure services to various networks worldwide. Operating margin at 42.67%
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above.
At the time this article was published Motley Fool newsletter services have recommended buying shares of Dolby Laboratories, Baidu, InterDigital, Linear Technology, Check Point Software Technologies, and NetEase.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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