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2 IPOs Better Than Facebook

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Sorry, Jeannie -- I dream of IPOs. Some of my fantasies are mere pie-in-the-sky hopes; a few, I know, will never happen. But a tiny core of realistic opportunities always remains.

Not long ago, Google (Nasdaq: GOOG  ) was just another hopeless dream, stuck in private ownership and seemingly out of reach. Now, I'm a happy shareholder of a tech giant with a $179 billion market cap and $2 billion a day in average trading volume. Not bad for a ticker that started out with a $27 billion market cap in 2004.

Put that stock down and back away slowly
If online networking sites like Facebook and Twitter want to make the most of their success, they'd better cash in with IPOs before their 15 minutes of fame run out. According to The Wall Street Journal and its usual cadre of anonymous sources, Facebook would hit the market at $40 billion or thereabouts in 2011. Twitter has no profitable business model yet, but it's estimated to fetch $1 billion or more in a hypothetical IPO.

Online giants like Google, Yahoo! (Nasdaq: YHOO  ) , and Microsoft (Nasdaq: MSFT  ) are falling all over themselves nowadays to integrate Twitter and Facebook into their own services, adding fuel to the fire. But what happens when one of those giants figures out how to do Facebook or Twitter's job even better? I'm envisioning fields of Dutch tulip bulbs evaporating in the sunset.

Internet-centric IPOs are so last decade, you know. In the more tangible world of hardware and software, better opportunities await.

Here's the hardware you wanted
Technology retailer Newegg has actually filed for an IPO, hoping to collect $175 million under the proposed ticker EGGZ. Newegg has been my preferred destination for hardware buys for years, dating back to when I made some pocket money building computers from parts. The catalog is always well-stocked, customer service is egg-cellent (sorry!), and the IPO cash could be put to good use marketing the existence of this brilliant little seller. Best Buy is for emergency use only in my book, because Newegg simply does Best Buy's business better.

Don't forget the software!
On the software side, I keep an eye on Canonical, the organization behind the Ubuntu Linux platform. Ubuntu started out as a desktop operating system, where it was a cheaper and quirkier alternative to Microsoft Windows. But it's now making serious inroads into the server market, challenging the likes of IBM (NYSE: IBM  ) and -- again -- Microsoft.

It's hard to get the average desktop user to change systems to something unfamiliar, but it's much easier to convince IT managers that there's a better platform available. Dell (Nasdaq: DELL  ) recently backed servers with Ubuntu preinstalled, and Canonical is exploring cash-making avenues such as cloud computing and backup services. It might never reach critical mass and go public, but investors in Red Hat (NYSE: RHT  ) and Microsoft will have a serious alternative available if it does. Here's hoping.

Did I miss your favorite upcoming IPO, real or imagined? Spill the beans in the comments below, and let the spitball fights commence.

Best Buy and Microsoft are Motley Fool Inside Value selections. Google is a Motley Fool Rule Breakers recommendation. Best Buy is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Best Buy. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. The file server in his closet was built from Newegg parts and runs Ubuntu Server. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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  • Report this Comment On January 31, 2012, at 12:04 AM, MHedgeFundTrader wrote:

    The street is chattering today over the prospect of an enormous payday with the imminent IPO for the social media company, Facebook. Price talk is valuing the company as high as $100 billion, making it the largest such floatation in history. Could the mega deal spell the end of the current bull market?

    Look at it this way. That is $100 billion that gets sucked out of the market. It is $100 billion that gets diverted away from existing equity allocations. Many investors will need to sell existing positions in other companies to pay for their new Facebook shares, especially in the technology sector.

    Can the market afford to lose $100 billion in buying power in its current fragile condition? I think not. Take a look at the chart below which has the (SPY) making a near parabolic move since the beginning of the year. At the very least, we need to pull back to just above $126, which takes us down to 1,256 on the S&P 500, smack dab on the 200 day moving average. If you don’t believe me, then take a look at the chart for the financials sector ETF (XLF), which has led the market this year and is clearly rolling over.

    I’ll tell you who the big winner in a Facebook IPOP will be. The San Francisco Bay area. $100 billion is a ton of money to pour into a single urban area. The issue is expected to create several billionaires and as many as 3,000 new millionaires in my neighborhood.

    The last time that happened was when Google (GOOG) went public, creating a wealth effect that never went away, taking the waiting list for a new Ferrari or Tesla out two years. Better buy real estate near Facebook’s Menlo Park headquarters, such as in Atherton, Palo Alto, and Mountain View. The bidding wars are about to begin!

    The Mad Hedge Fund Trader

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