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B&E This Fortnight
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Issue Date - 24/11/2011
Another bubble?
Groupon Inc. successfully raised $700 million to become the largest IPO by any US Internet company since Google Inc raised $1.7 billion in 2004. Post the IPO, the company, which sells discounted Internet gift coupons for cinema tickets, restaurents, clubs et al, has a valuation of $12.8 billion. With its current valuation, Grouponís value stands at more than double of what Google offered to buy the company last year Ė $45.9 million. But problems are not yet over for Groupon. At a time when questions about accounting are pouring after the company altered its IPO filings twice, GroupOn also stands to face a stiff competition from big players like Google and Amazon. The companyís ability to generate profits and revenues in the long term remains doubtful in the absence of a strong and sustainable business model. Meanwhile, the company serves more than 150 markets in North America and over 100 markets across Asia, Europe and South America and employs over 7000 people. However, Grouponís share price at $20 seems very volatile as some of its existing investors might be willing to sell their stake at current valuations. However, this kind of valuation is not something new for Internet companies. In the past two years, Facebook, LinkedIn, Twitter et al have all seen multibillion dollar valuations.

Honda to cut us,canada production
Natural calamities have impacted industries in a big way this year and Japanese firms have been the biggest victims of it. Shortage of auto parts for the past three months due to the disasterous flooding in Thailand has forced Honda to cut its US and Canadian factory production by 50% and has led to the delay in the launch of its new CIVIC model for the second time this year, the automaker announced in Detroit. This has been a big setback for Honda even as it has been trying to absorb the shock of the tsunami in Japan. Now Honda is planning to schedule a non-production day in its North American plants from November 11 and cancel all Saturday overtime workshifts during the month. Honda Motor Co.ís announcement came the same day the Japanese automaker announced that its quarterly profits have gone down by 56%, troubled by the strong yen and production disruptions from the March tsunami disaster. The cuts, which come just as Honda was recovering from the March 11 earthquake and tsunami in Japan, will run as Honda tries to find alternate sources for microprocessors that are manufactured in Thailand. The Thai flooding, which began in July, has forced many auto parts plants to close and has also affected Toyota Motor Corporation, which has cut overtime for production in North America.


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