I Think Apple Is Going to Buy Facebook

Nov 02 2010

It all started with the meeting between Zuckerberg and Jobs the other day.  The media wrote the story as simply a meeting between two owners to discuss Apple’s new project Ping.  I think it’s much more than that.

Apple has $51 Billion dollars in cash sitting in the bank. Do you know what $51 billion can buy you?  Anything you want.  Facebook stock currently values the company at $33 billion but my guess the final price would be in the $30 to 40 billion dollar range.  So why in the world would they blow their cash?

There are many reasons.  First, they are generating $22 million A DAY in earnings to put in the coffer.  Two, the cash is a drag on earnings.  They actually have too much cash and it’s gotten so large it actually dilutes the earnings to a point it drags down the stock price.  How do you give a P/E to cash?  Eighteen percent of the company’s value is in cash.

So what can they do with all this money?  They can do three things.  Buy something. Buy back stock ie invest in themselves. Give it away ie a dividend.  Let’s start with number three.  Steve Jobs has always been on record that he’s not going to pay a dividend.  They could always change their minds but I don’t see this happening. Buying back stock seems like a great move to me.   I’ve always felt in any business, there is not better investment than in yourself.  Apple has billions to invest and they should invest it by buying back stock.  But really they don’t have to. They are the second largest company in the world and when you get to that level how much further do you need to take it.  That takes us to point three.  Who do you buy?

The oil companies, GE, and the other huge companies with tons of cash can buy other competitors and make themselves larger or more vertically integrated.  GE is so massive they just keep adding new companies under their wings.  They have so many divisions they can essentially buy anything and have it fit into some category.  This won’t work for Apple .  They don’t really want to buy a content provider.  They provide better content delivery than anyone out there.  They don’t need the content.  There’s no point in buying an electronics firm.  Anything they want to make they can do it themselves, they don’t need someone else.  There are plenty of other small companies out there that could add some little piece of the puzzle to Apple’s technology but when it comes to buying something that fits into what Apple is trying to do, there is one big buy that can make it happen,  Facebook. The largest online content/people management site on the net next to Google.

They can easily afford it and it’s is the best content delivery business on the Internet.  A nice little package of every person on the Internet all rolled into one.  A package that would allow Apple to put all their devices and content delivery right in the user’s lap.  Secondly, Google would shit a brick.  Presently, there are only three worlds on the Internet.  Google, Facebook, and Twitter.  Twitter is a couple steps down from the first two.  If Apple owned Facebook it could easily match Google in terms of breath and scope on the net.  Finally, it would also be purchasing a company that is already making money yet still has a nice growth curve.

Because Facebook is privately held it’s impossible to know exactly how much revenue they bring in but the low end is being reported at roughly 1 billion dollars.  All sources say they are cash flow positive and profitable.  It would hard to not be profitable with a billion dollars revenue and 1000 employees.  Even more important,  Facebook provided 13 percent of all traffic to websites (2009 data)  vs Google’s 7%.  I’m sure it’s grown since then.

If Apple wants to buy the Internet with their extra cash now is the time.  BEFORE Facebook goes public. Before a competitor does.  I think Apple is contemplating the purchase right now.  I have an email into Steve asking him if he’s buying Facebook as we speak.  I’ll let you know what he says.  Of course he and I had a falling out back in the 80′s when I told him his NeXt cubes were too expensive and he hasn’t talked to me since.

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Outsmarting the Dumb, Outworking the Smart

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16 comments


  1. Post author
    ShaneCultra

    @deke

    I heard the same thing about youtube. Unlike MySpace, all generations are now personally invested in Facebook. There will be no other facebook for a while. Twitter is a different story

  2. Svein Tore

    who wants to and can afford to buy facebook are many.
    but zuckerberg has already said no to some companies including google.
    why should he sell?
    he is today on of the worlds most influential people.
    he is too young to retire. if he retires now he will probably becomes bored in a few years.
    why would anyone sell facebook, that would be like selling microsoft before they went public in 1986 or google in 2004.

  3. Domain Report

    Zuckerberg won’t sell FB to Apple, he is young and enjoying working on FB and building it up. What else would he do? Obviously he’s not interested.

    Facebook could become bigger than Apple too. They have the visitors and unless they royally screw up, they have a captured audience that just builds and likely won’t go anywhere. They own the virtual spot where everyone goes to hang out, and it’s likely not going to change. Apple continually has to come up with new devices and products, and face competition from RIM and other device makers.

    I could see them doing some sort of partnership or deal that’s benefits each company, or Apple buying a stake in Facebook like Microsoft did. Microsoft is also sitting on a lot of cash, but they won’t get FB either.

    In short Zuckerberg is probably having too much fun, getting challenged each day, and gets a lot of prestige by maintaining the status quo.

  4. OuMun

    Honestly I don’t see so much value in FB.

    They trumpet they have 500m accounts but how many of these are really active accounts (logged in at least once in the last 30 days)? Not many I tell you.

    I’m already quite bored of that after 6 months of “intense” use.

    A part of that I see a lot of traffic/accounts are from Asia which talking from a marketing point of view (my point) it’s crap.

    Most of computer illiterate people are there because the smartest thing FB did is provide a tool that actually harvested your Yahoo Mail, GMAIL or HotMail or whatever email account you had and spread invites everywhere (that was a smart move, I must admit it).

    You are worng also if you compare YouTube to FB. They are 2 different things and YouTube has been a kind of revolution on the web. A site featuring videos from all over the world on about any topic you looking for.

    Where’s the revolution in FB?, apart from having a huge community and checking how fat your schoolmate became since you met him last time?

    Is FB going to be replaced? I don’t know.
    But If I had Apple deep pockets I would shop elsewhere

  5. Franki

    They don’t need them. They could buy them though they will just start up something on their own. It would only take a few billion and they could just smash them…

    They will need that money to compete with google.
    They should be buying up names like tablets.com for review sites. Check out this story. Can’t believe none of you bloggers have picked up on the story of the month.


  6. Post author
    ShaneCultra

    @Franki

    There were a few stories on tablets.com Certainly a nice purchase. A name is just a name unless there’s a business behind it. Logo.com was a much bigger story

  7. TLD

    Apple is a product company. While they certainly have the cash to buy FB I don’t see them diverging from their core strength and into a social network… UNLESS they were planning on mutating FB into the new search engine looking to dethrone Google. Then I might believe it.

  8. Deke

    The difference is YouTube created a technology that enables folks to easily create and upload video. Before them there was no easy service.

    Facebook can be duplicated, but like MySpace, the honeymoon will fade, bad stories will come about regarding the service, ads will turn folks off, and an even newer, younger generation that is either under seven years old or not even born yet will look at Facebook as that service that old people use, and it won’t be COOL anymore. :)

    Google won’t hold their throne forever either. Masses can move way to easily Online — that is the Achilles heel of all these services. They bedrock can be broken apart easily.

  9. Deke

    I also agree with OuMun that the illiterate and dumber folks use FB. Almost all the smartest fuc*ers I know would never even dare consider the notion of having a FB page.

    Also, some of the dumb ones are getting turned off. One of the young roofers that just put a roof on my home told me he got tired of girls questioning every girl on his FB page — so he deleted it and never wants to go back.

    I’ve been hearing this nagging girlfriend story a lot from single guys over the last year or so.

  10. Anunt

    Apple does NOT need facebook. Cash is king in this economy. Facebook is barely breaking even or barely making a profit…Apple is not that stupid to spend $30B to $40B on something that is not even making any profit. They could create their own facebook for under $1 Billion very easily.

    Apple can partner with facebook…but dont need to spend any money buying them out.

    Keep dreaming Facebook…Apple dont need you!

  11. FB Sucks

    FB isn’t a good fit for Apple. They have no interest in devoting the resources necessary to keep FB relevant when they could be making new products. You point out yourself that they’re making cash hand over fist. The Jobs/Suckerberg meeting was about FB pulling the plug on Apple’s unauthorized use of FB Connect. Jobs is used to doing whatever he wants and didn’t think FB would call them out on it. I love Apple products but Jobs and Co. think they’re the only ones allowed to have “onerous” licensing terms. With all those billions in the bank they still didn’t want to pay FB’s fees for FB Connect. End of story.

  12. Twettiedotcom

    Facebook is a social network service, Apple designs and markets consumer electronics, computer software, personal computers.
    Not necessary the buying, the contractual collaboration is profitable for both of them.
    Officially Integrating the world’s best social service and the most innovative hardwares is the next strategical step to increasing the market sharing.

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