Edited to add: All that glitters is not gold. Sometimes it is surprising to see which companies are making profits and which companies are losing money. Check out this article on popular tech companies and see if anything surprises you.
Posted by Ben Taylor
At the turn of the millennium, the “Dot Com Bubble” burst—an infamous example of popularity trumping profitability, noisy buzz beating good business. Trendy start-ups like Pets.com raised hundreds of millions, produced a Super Bowl ad and went public, only to fold months later, with hundreds of layoffs and thousands of bitter investors. Enamored by the potential of new technology, everyone forgot about Business 101.
At least the industry has learned its lesson.
Or has it? At FindTheCompany, we turned to the current tech landscape to see which companies might be reliving the late-’90s bubble. We wanted to find examples of hot, growing organizations that nonetheless remain extraordinarily unprofitable. Specifically, we started with companies that had at least:
- 50 percent revenue growth year over year (2014 vs. 2013)
- 20 percent headcount growth year over year (2014 vs. 2013)
We then sorted the list by 2014 profit, from lowest (i.e. most negative) to highest. The data comes from Zacks Investment Research.
The following 15 companies emerged as both the hottest (i.e. growing fast) and most unprofitable (tens, if not hundreds of millions, in losses):
Unsurprisingly, Twitter comes out on top. Once pegged as the successor to Facebook’s social media throne, Twitter has stalled where its rivals have grown, at least when it comes to profits. The service is still wildly popular—with over 300 million active monthly users—but its profits remain deep in the red. Unless the social media giant can get better at monetization, the business simply isn’t sustainable.
Outside of Tweet Land, we see a mix of security and enterprise software companies composing much of the top 10. ServiceNow (service management software) and Workday, Inc. (human capital management software) have each emphasized revenue and customer growth, assuring investors that massive expansion now means more profit later. The same is true for network security firms Palo Alto Networks and FireEye, Inc., where eye-popping revenue numbers have come hand-in-hand with net-negative profits. While none of these companies face Twitter-esque pressure from investors, some are beginning to feel the heat.
Going public might bring about more money, more support and more visibility, but it can also impede growth. “Once you’re public, Wall Street wants to see earnings,” said FireEye CEO David DeWalt in an inter
view with the Wall Street Journal. “If I had my way, I probably would continue to grow the company much faster than I would produce earnings.”
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