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Chapter 8 Social Media Information Systems
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Coll abora tion exerCiSe 8

Using the collaboration IS you built in Chapter 2 (page 110), Tech Companies Market Cap ($) P/E
collaborate with a group of students to answer the following
questions. Apple 721.63B 16.96
Twitter’s IPO on November 7, 2013, was one of the biggest Google 368.92B 25.82
tech IPOs in history. The social media giant’s stock closed that
day at $44.90 a share, making the company worth an estimated Facebook 219.51B 75.63
53
$25B. Not bad for a company that had never made a profit. In Amazon.com 198.24B N/A
fact, Twitter posted a $70M loss the quarter before listing! How
could a company be worth $25B and never have made any money? Netflix 34.20B 147.31
Analysts argue that tech companies, like those shown in LinkedIn 25.35B N/A
Figure 8-16, should be valued based on growth potential, user
base, consumer engagement, and market size. It turns out that Twitter 24.68B N/A
Amazon.com, Instagram, and Pinterest weren’t profitable when
they went public, either. Traditional Companies Market Cap ($) P/E
Traditional IPO valuations focus on measures of profit- General Electric 272.23B N/A
ability. This means investors look at revenues, profits, assets,
liabilities, and new products. Figure 8-16 shows price-to-earn- Wal-Mart Stores 251.73B 15.45
ings ratios (P/E) for several well-known traditional and tech Verizon Comm. 202.80B 20.88
companies.
Using iteration and feedback, answer the following questions: Toyota 216.92B 12.91
BP 126.88B 34.17
8-6. Compare the tech companies’ P/E ratios to the tradi-
tional companies’ P/E ratios. Note that some of the Johnson & Johnson 277.11B 17.48
tech companies have very high P/E ratios. (A low P/E Ford 61.65B 19.44
is good; a high P/E is bad.) Some don’t even have a P/E
ratio because they didn’t turn a profit. As a group, list Figure 8-16
the reasons why the tech companies have such high Tech Company Valuations
P/E ratios. Are the prices of these companies’ stocks
justified given the earnings? Why? and take the opinion of your network on this issue.
8-7. Identify public tech stocks you believe are undervalued Summarize your discussion in a couple of paragraphs.
(not limited to this list). Design an investment portfolio 8-9. Analyze the social buzz created by Twitter before the
consisting solely of tech stocks that you believe will be launching of its initial public offering (IPO). Make
profitable. Justify your decision with regard to risk and a report highlighting the steps taken by Twitter to
return on those stocks. create a positive social buzz regarding its IPO. If you
were handling Twitter’s IPO campaign as its the social
8-8. Currently many organizations are using social media data
to analyze the current trends in technology. Make a twit- media manager, what steps would you have taken to
ter handler of #Roleofsocialmediainjudgingcurrenttrends create a greater impact on social media regarding the
forthcoming IPO.

Ca Se StUD y 8

Sedona Social

Sedona, Arizona, is a city of 10,000 people surrounded by by gorgeous sandstone red-orange rocks and stunning red rock
Coconino National Forest. At an elevation of 4,500 feet, Sedona canyons, as shown in Figure 8-17.
is considerably higher than the valley cities of Phoenix and This beautiful city was the location for more than 60 mov-
Tucson but 2,000 feet below the altitude of Flagstaff. This mid- ies, most of them westerns, between the 1930s and the 1950s.
dle elevation provides a moderate climate that is neither too hot If you’ve ever watched an old black-and-white western, it was
in the summer nor too cold in the winter. Sedona is surrounded likely situated in Sedona. Among the well-known movies located