Don't invest in Internet, warns Gates

BILL GATES, the computer software pioneer, has added his weight to the chorus of voices warning that Internet stocks have become seriously overvalued.

Many of these companies, some of them now valued by stock markets at billions of dollars, would not survive the competitive pressures of the World Wide Web, he said.

Stressing that he was a software specialist and not an expert on stock valuations, Mr Gates said he would not advise any friend to invest in Internet companies, and those who did were taking on "monumental risks".

The billionaire software entrepreneur said that the pace of change in Internet technology and the degree of commercial competition that the net makes possible made projections for the future revenues of many of these companies highly suspect.

In a surprising observation which seemed to question the very high valuation the stock market puts on his own company, Microsoft, Mr Gates told a meeting of journalists at the World Economic Forum in Davos, Switzerland, that he thought that all technology stocks were much too highly valued. "They should be selling on lower multiples than ordinary companies because this business is changing so rapidly, and as a consequence it is impossible to predict an earnings stream into the future," he said. "Disney and Coca- Cola are in a far more stable position in the market place than we are, and with them you know they will be making good profits for years to come. With many tech companies this is not the case".

Mr Gates predicted that the balance of benefit from the rapid growth of electronic commerce would be with consumers rather than the businesses that operate on the Net. "Many old established distribution companies are now appearing on the Internet and the competition is going to be intense," he said.

"Investors are rushing in like a gold rush. In some respects this is a good thing since it attracts huge amounts of venture capital into the business and that accelerates the pace of progress and change in this industry."

Mr Gates said Microsoft wouldn't rule out buying an Internet company, even at current valuations. "Sometimes there is a piece which fits into our strategy which might make it worth paying these valuations, but that is very different from what the company is worth on a stand-alone basis."

Mr Gates thought it a terrible indictment of European enterprise and business that the composition of its top 50 companies had changed so little over the past 25 years. In the US, only three or four of the top 50 companies are the same. In Europe it was the other way round.

He thought it unlikely that Microsoft would still be in its present position in the league table of US companies in 25 years time, given the degree of competitive pressure and change it has to respond to.

Looking relaxed and at ease with the world, Mr Gates said he wasn't allowing the anti-trust case against Microsoft in the US to interfere with either his life or his company. There are more important things in life, he said, admitting that he now took his daughter to school every Wednesday morning before going to work.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map