Mark Cuban Breaks Rules

Mark Cuban, who gained billions by selling Broadcast.com to Yahoo! (Nasdaq: YHOO  ) in 1999, is himself aRule Breaker. From his first business -- selling garbage bags, of all things, door-to-door at the age of 12 -- to one of his current passions -- running his appropriately named NBA team, the Dallas Mavericks -- Cuban is an iconoclast of the highest order. Now, he's shaking up the media business with his new company, 2929 Entertainment.

I recently interviewed him on The Motley Fool Radio Show. The following are highlights from our conversation:

David Gardner: I know you have expressed public skepticism in the past about the stock market. . I won't say you have ever called it a Ponzi scheme exactly.

Mark Cuban: Oh, I called it a Ponzi scheme, there is no question about it. It is, and that is just the way it is. . I will say it today, I will say it forever, that owning a company like Cisco (Nasdaq: CSCO  ) or any company that doesn't pay dividends is no different than owning a baseball card. It is not the net present value of cash flows, it is just whatever you can convince someone else to buy it from you for. That's it. Nothing else, nothing more, nothing less. .

With a private company, you generate cash, and you put that money in the bank. When people come to me to invest in companies, I don't want to hear about exit strategies, I want to hear about how much cash are you paying me when we start generating profits. . Anybody who comes to me and says our exit strategy is to go public, I just turn them away. I don't even talk to them.

David Gardner: What are your thoughts right now about Google (Nasdaq: GOOG  ) going forward, either the company or the stock?

Mark Cuban: Well, I think the company is a good company as everything is positioned today. Internet advertising, pay-per-clicks, branded advertising, (and) website advertising is huge right now. Money is being drawn from other mediums and that is not going to stop. Google and Yahoo! are going to be recipients of that. .

You are not going to see an ever-increasing market share for online advertising. It is going to level out at some point. Google hasn't shown -- nor (have) any of the online sites really shown -- anything that says, "We know how to compete in a mature industry." That is not to say that they can't. That is not to say that they won't. It is just not there yet. So, do I think there is risk associated with it? Yes. But they are smart guys, and hopefully they will come up with something.

David Gardner: What is your take on what Apple (Nasdaq: AAPL  ) has done and is doing?

Mark Cuban: Well, Apple has done a phenomenal job. It is just a great company, and they amaze me at how they are able to regenerate themselves. But now they are a consumer electronics company. They have to come up with hit after hit after hit because we know what happens in the consumer electronics industry. You get knocked off, you get copied, and then price becomes a competitive issue. .

The only company that has really been able to excel in technology on an ongoing basis has been Dell (Nasdaq: DELL  ) , and that is because they realize they are not a technology company. They are a sales and service organization. . To their credit, they have been able to do that. Apple is not there yet. It may be something they evolve into. Who knows? But right now Apple is riding the crest. Now they have got to come up with another act. They have got to come up with their next iPod, and who knows if they will do it. That is the risk and that is a scary proposition.

David Gardner: What does the Mark Cuban investment portfolio look like these days?

The rest of the interview, including the answer to that last question, is available to subscribers of the Motley Fool Rule Breakers newsletter. Click here to take a free 30-day trial and gain access to the interview and all of the Rule Breakers team's stock picks. Current Rule Breakers subscribers can click here to go directly to the interview.

David Gardner doesn't have a financial interest in any of the companies mentioned. View his profile here. The Motley Fool has a disclosure policy.


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