Fanciful sums part of new-age maths

By GILES PARKINSON

Sydney view

"A few honest men are better than numbers," said Oliver Cromwell, while once upon a time, people needed only to count to three, after which it was "many."

Last week, somebody managed to count to $545 billion, put a dollar sign in front of it and declared it to be the value of the merged AOL Time Warner.

Their superiors have probably told them to keep counting.

No one at America Online and Time Warner could properly explain how they arrived at their $NZ695 billion valuation, because, true to the dynamics of this "new economy," it is nothing but a fanciful number.

A simple addition of their respective market capitalisations came to just $A342 billion, and not even the promised $A1 billion in annual savings would be enough to account for the missing $A200 billion.

To continue the theme of meaningless numbers, it is worth noting that the increase in value recorded in the first half hour of trading after the merger announcement was roughly equivalent to the GDP of New Zealand.

The fall in value after the market had a closer look was more than twice the country's annual output.

It was also a week of big numbers for the Australian market. The announcement of the AOL Time Warner merger propelled News Corp shares into orbit and the company promptly added $A15 billion to its own market capitalisation, a record daily gain for an Australian-listed company.

There is an irony in that. News Corp shares did not go up because of a sudden increase in profit projections or because of a Murdoch buying spree. They jumped because the market decided that its huge content must make it a merger candidate rather than a predator, despite the views of its executive chairman.

The big numbers that spring from the age of e-commerce have little meaning, but great significance.

They mean, for instance, that Kerry Packer need not waste the resources of Publishing and Broadcasting on a bid for John Fairfax Holdings. Sometime soon market valuations will probably allow him to do it through a paper offer from his new internet company ecorp, which has sales of under $A20 million and losses of nearly as much. But little matter if one day it can make a stock offering for Fairfax, which has more real revenue and real profits than ecorp could dream of.

The prospect of shifting valuations and merger activity over at the Packer camp has made Kerry Stokes very envious. So he announced an internet deal between Seven Network and NBC.

There was no transaction of money, nor even a valuation on the deal, but it did show that Mr Stokes is following in Mr Packer's footsteps, if on a smaller scale.

Mr Stokes' people even got to drop hints of a possible float of Seven's internet division for about $A500 million. The number means nothing because most analysts think his internet businesses would be worth $A100 million at most.

It earned him the title of "Pocket Kerry" and a 10 per cent jump in the share price of Seven. The name calling wouldn't please him but the share price gain would. It means he could just about forget cost-cutting and programme initiatives. He has the content, and as the week's sharemarket reaction showed, content is king.

The big gainers were News Corp, Fairfax and Seven. For once most of the telcos were static and the smaller internet stocks were darting about in all directions amid claim and counterclaim about the significance of their respective deals.

* If this talk of new economies and paradigms and shifting valuations is causing confusion, there is at least one group that has been completely unfazed by it all, probably because they read about it in the stars.

At an international astrology conference in Melbourne over the weekend, it was revealed that between February 25 and March 17, Jupiter and Neptune will be aligned and this is likely to cause a significant price correction on most sharemarkets around the world.

Right now, in fact, you should be buying grain, wheat and corn, because if you haven't been looking at the stars recently, there is an equally auspicious alignment between Saturn and Uranus right now.

Astrologer Ray Merriman says the price bubble for technology stocks could be pricked between June and August this year, because when Saturn stops being aligned with Uranus it will go off at an unfortunate angle. And that spells a 22 per cent fall, give or take a decimal point.

But that will only be a correction. As long as Uranus stays in Aquarius, where it has apparently been for the last five years, then the bull-run should keep going until 2003.

At which point the valuer at AOL Time Warner should have got all the way to a trillion.

* Giles Parkinson is the Australian Financial Review's deputy editor.