He was picking an earnings number ($1 billion-ish) and a P/E ratio (20ish) and solving for the P.
Of course, the $1 billion is revenue, not earnings, so that number is likely to be lower (or negative) and the ratio is likely (if history is any guide) to be higher due to that, so this kind of calculation is pretty pie-in-the-sky.
The shareprice, based on a fixed P/E. If their earnings are $1 billion, and their P/E is 20 (similar to Google), then their cap is $20 billion. See http://en.wikipedia.org/wiki/P/E_ratio
(Note the error I made above regarding their earnings, though)
So you assume comparable P/E to other much larger and more established companies, in order to arrive at a fanciful market cap number, in order to prove...something. No wonder these bubbles keep bursting.
Bigger, more established companies generally have (much) lower P/E ratios that new companies (eg, Google had a P/E ratio of 118 at their float price, and had a lot of criticism for pricing too low. See http://www.businessweek.com/technology/content/aug2007/tc200...).
I'd be very interested in what you think a non-fanciful market cap number is - and how you arrive at it!
My point is that when they float, they will raise a lot of money. It might be $5 billion, it might be $20 billion, it might be $50 billion. In any case, they are going to be sitting on a big reserve of cash.
Your point was that they will be irrelevant in 5 years. My argument is that - ignoring other factors - any company in the tech sector sitting on a few billion dollars in cash is far from irrelevant.
"I'd be very interested in what you think a non-fanciful market cap number is - and how you arrive at it!"
Market cap is defined as "a measurement of size of a business enterprise (corporation) equal to the share price times the number of shares outstanding of a public company".
My point all along is that you are engaging in wild, unfounded speculation about a non-public company, using wholly inappropriate metrics.
