Facebook Hype? Here Are 10 Tech Companies That are More Profitable than Facebook

Facebook Hype? Here Are 10 Tech Companies That are More Profitable than Facebook

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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 Facebooks'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?

 

Interactive Chart: Use the Compar-O-Matic to compare analyst ratings for all the stocks mentioned below:

List sorted by operating margin.

 

1. Changyou.com Limited (CYOU, Earnings, Analysts, Financials): Develops and operates online games in the People's Republic of China. Operating margin at 57.94%.

 

 

2. Check Point Software Technologies Ltd. (CHKP, Earnings, Analysts, Financials): 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, Inc. (BIDU, Earnings, Analysts, Financials): Provides Internet search services. Operating margin at 52.53%.

 

 

4. Linear Technology Corp. (LLTC, Earnings, Analysts, Financials): Designs, manufactures, and markets a line of linear integrated circuits. Operating margin at 48.27%.

 

 

5. InterDigital, Inc. (IDCC, Earnings, Analysts, Financials): Engages in the design and development of digital wireless technology solutions. Operating margin at 47.78%.

 

 

6. Hittite Microwave Corporation (HITT, Earnings, Analysts, Financials): 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, Inc. (NTES, Earnings, Analysts, Financials): Engages in the development of applications, services, and other technologies for the Internet in China. Operating margin at 46.77%.

 

8. Dolby Laboratories, Inc. (DLB, Earnings, Analysts, Financials): Develops and delivers products and technologies for the entertainment industry worldwide. Operating margin at 44.97%.

 

 

9. SolarWinds, Inc. (SWI, Earnings, Analysts, Financials): Designs, develops, markets, sells, and supports enterprise information technology (IT) infrastructure management software to IT professionals. Operating margin at 43.25%.

 

10. VeriSign Inc. (VRSN, Earnings, Analysts, Financials): Provides Internet infrastructure services to various networks worldwide. Operating margin at 42.67%

 

 

(Article by Rebecca Lipman; List compiled by Eben Esterhuizen, CFA)

 

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One Response to “Facebook Hype? Here Are 10 Tech Companies That are More Profitable than Facebook”

  1. jal says:

    Another great article by Rebecca Lipman. This is very useful information for making investments.

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