WhatsApp has 450 million users worldwide and is one of the most downloaded apps on several continents. Wieser reduced his rating on the company’s shares from buy to hold. A separate re-assessment of ad revenues for the core business was leading us to raise expectations, but dilution due to WhatsApp partially offsets these changes.” In a note to clients, Brian Wieser, senior analyst at Pivotal Research, said: “While we see strategic merit, the acquisition is difficult to justify on metrics we use to value Facebook. Before this, Facebook’s largest deal had been its $1bn purchase of the photo-sharing site Instagram. The deal is the largest ever made for a venture capital-backed startup, easily outstripping any tech startup purchase, including Microsoft’s $8.5bn acquisition of Skype and Google’s $3bn purchase of the ad firm DoubleClick and its $1.65bn YouTube deal. But only the paranoid survive right? Investors are not entirely impressed by the acquisition.” “In essence, it’s a paranoid defence play in the spirit of Intel that pursued the same strategy back in the old days to fend off new competitors. Peter Garnry, head of equity strategy at Saxo Bank, said: “Facebook’s technology deals are often not hinged on cash flows but more on controlling a competitor that could ultimately pose a great threat to Facebook’s dominance and market value. WhatsApp was reportedly courted by Google last year, and Facebook made the purchase after failing to secure a $3bn deal with the popular messaging service Snapchat last year. ![]() The purchase comes as tech giants fight to secure a lead in mobile technology – the fastest-growing segment for customers and advertisers. WhatsApp is receiving $4bn in cash, $12bn in Facebook shares and $3bn in restricted stock that its management will receive over the next four years. Analysts said investors were rattled by the price – a record for an acquisition by Facebook – and the fact that the purchase was being made largely in shares, therefore diluting other shareholders.
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