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April 06, 2007
Balance of power tilts back to big companies
Verizon's stunning legal victory in patent suit against voice of IP upstart Vonage should be seen as part of a broader trend favoring big companies. Just a few years ago, it was common wisdom that upstarts would eat away at the market power of big companies like Verizon. Now Verizon and others are fighting back, using the courts and the market place. Viacom's suit against Google and YouTube is another example of how big companies are regaining their sense of power in a market that has been shaped by smaller players in recent years. Private equity giant's proposed IPO is another sign that the balance of power is swinging back in the favor of big companies. As many private equity experts have noted, the main message of the Blackstone IPO is that much bigger companies are now fair game for IPOs. While the pending TXU deal is on track to set the LBO record at about $45 billion, there's a lot of speculation that a $100 billion LBO (Home Depot?) could happen this year. The flip side of that argument, one private equity manager noted, is that large cap stocks are undervalued.
A few years ago, it was fashionable to dismiss big companies as dinosaurs. But as they Vonage decision shows, the analogy doesn't really work.
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