Abigail Townsend: Don't believe the hype? The City just lapped it up
Carphone Warehouse and gaming sites show sure bets can go wrong
Sunday 15 October 2006
Remember the old saying that if it looks too good to be true, it probably is? Well, a number of people in the City apparently forgot - and so must have had a rude awakening in recent weeks.
Take, for instance, online gaming companies. Well over a year ago, I remember talking to a senior leisure analyst. While not writing off the sector, he was insistent that the US would not ignore the grey legality of these sites indefinitely.
At the time, though, his was largely a lone voice - and one that was drowned out by the stampede of investors desperate to get a piece of this booming sector. Since then, we have seen directors arrested, sites shutting down and values plummeting. And last week, Sportingbet's US operations were sold off for one lonely dollar.
I'm not saying online gaming sites aren't viable, because there are. A regrouping is needed, a time to lick wounds and take the sting of write-downs and losses. Then new markets will be found and gamblers outside the US signed up.
But the excitement was generated by the US - a huge market that provided these sites with all their cash. It was just a shame no one much cared about the legal implications.
Then, of course, we've had Carphone Warehouse. For years, the retailer has been everyone's favourite, with its chief executive, Charles Dunstone, quite rightly winning plaudits for the way he ran his business.
Yet no company is immune to risk, and no chief immune to making the wrong decision. So while there can be little doubt that the retailer's deal to buy AOL's internet access in the UK, announced during its roller-coaster ride last week, was a good one, not everything, all the time, was going to go Mr Dunstone's way.
Vodafone's decision to end a 17-year relationship selling phones in Carphone Warehouse is entirely understandable. The mobiles giant is losing market share in the UK and, whatever the reasons for this, it has taken a hopeful step towards changing its fortunes by securing lower commissions and a sales guarantee from its new vendor, Phones4U.
Orange then revealed it was reviewing its sales strategy, and O 2 said it would be sticking by the retailer - though if there was a chance to get lower commissions from it, well, why not? All this should not have come as a surprise, but judging by the share price slide, it apparently did.
And finally, there is YouTube, the $1.65bn (£887m) website snapped up by Google and the cause of much debate - including later in these pages - about whether this is a sensible way to spend money or another bubble forming.
I think these valuations are definitely too high, though with the caveat that eventually things will settle and these investments, in same cases at least, will be made good.
But nothing in business is guaranteed. Markets and companies move in cycles. Busts follow booms follow busts. So when in doubt, remember: if it looks too good to be true, it probably is.
Give mothers a break
A number of readers - all women - have been in touch after last week's column about gender in the workplace. There I made a plea for women to be judged on their abilities, and not singled out for being female, regardless of the good intentions. Some readers agreed, others didn't. But one made a point I had neglected to address: children.
Creating a level playing field in the workplace is not helped by giving women special treatment - but neither is it helped by our attitudes to mothers. Childcare is expensive and rarely flexible enough. Hours in the City are long and competitive; knocking off early to pick up children, even when time is made up, can be viewed dimly.
Business and government must give those who go on to be mothers the tools that allow them, should they choose, to take their places back at their desks.
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