Facebook (FB)’s jaw-dropping $19 billion acquisition of mobile-messaging application start-up ‘WhatsApp’ is a sign of sheer desperation to retain users, Rob Enderle principal analyst at Enderle Group told CNBC on Thursday.
“This is crazy money. I think they massively overpaid for this, they’ve done it because they are desperate,” Enderle said. “They are so worried that they are bleeding users that they are trying to get their user count up by buying companies that have users. But that reminds me so much of some of the strategies of the dotcom era, it’s actually giving me chills,” he added.
In a press release, Facebook disclosed the App has more than 450 million monthly users, of whom 70% are active on any given day. The total number of messages on the service is approaching the total volume of all SMS text messages globally (19 billion sent & 34 billion received per day), said Facebook, adding that “WhatsApp is on a path to connect 1 billion people.”
Wall Street appeared unimpressed with the deal, sending Facebook shares down as much as 5% in afterhours trading from a close of $68.06 on the Nasdaq on Wednesday. In pre-market trading on Thursday, the stock is still down by almost 4% at $65.40 a share.
“This showcases the market is thinking this is not good management practice. Investors don’t get excited about companies that aren’t using good judgment,” Enderle said.
Leave a Reply