Facebook Inc (FB)’s WhatsApp Buyout Sends BlackBerry Ltd Soaring


Immediately after Facebook Inc (NASDAQ:FB) announced the acquisition of WhatsApp for a whopping $19 billion, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares jumped as much as 9% to $9.82. The world’s largest social networking company will pay $4 billion in cash, $12 billion in stock and another $3 billion in restricted shares. That means Facebook paid $42 per active user for WhatsApp. It’s the biggest Internet acquisition since AOL’s $124 billion merger with Time Warner Inc (NYSE:TWX) in 2001.

Facebook Inc (FB)'s WhatsApp Buyout Sends BlackBerry Ltd Soaring

WhatsApp founder joins Facebook board

WhatsApp was a big threat to Facebook Inc (NASDAQ:FB)’s dominance on mobile. The mobile messaging service has about 450 million monthly active users, and it’s adding 1 million users every day. Mark Zuckerberg said in a statement that WhatsApp is growing at a much faster pace than any other messaging service including Facebook. He said the start-up with just 55 employees is on the path to have 1 billion active users worldwide.

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BlackBerry Facebook

WhatsApp has been slow in monetizing its users. The company charges only 99 cents a year after the first year of free service. Mark Zuckerberg isn’t worried about it. Facebook Inc (NASDAQ:FB) aims to have 3 billion active users worldwide. He said when the company will have more than 3 billion users, there will be plenty of opportunities for monetization. WhatsApp has a very high level of user engagement.

Facebook Inc (NASDAQ:FB) said that WhatsApp co-founder and CEO Jan Koum will join its board. WhatsApp will continue to operate independently. Koum, a former Yahoo! Inc. (NASDAQ:YHOO) engineer, founded WhatsApp in 2009 with Brian Acton. Sequoia Capital invested $8 million in Koum’s start-up for a more than 15% stake, which is now worth close to $3.5 billion.

Facebook-WhatsApp deal should push up BBM valuation

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares surged because the deal puts a rough valuation on its BBM app. The Canadian company pioneered the mobile messaging service. But it didn’t open the app to other platforms. As a result, BBM failed to grow like WhatsApp, which is available on iOS, Android, Windows Phone and BB10. BBM is now available on other platforms like Android and iOS.

Though BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s device business is struggling, BBM remains popular. The messaging app still has more than 80 million users. The company is planning to add many new features including free phone calls to BBM. But investors and analysts had attributed a miserable value to BBM. Raymond James analyst Steven Li earlier this week estimated BBM’s value at just $240 million or $3 per user. On the other hand, Facebook Inc (NASDAQ:FB) values WhatsApp at $42 per user. The deal should prompt Wall Street to rethink BBM’s valuation.

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