I've been reading -- and respecting -- the works of GigaOm's Om Malik for years. I think he lost it yesterday, suggesting that Facebook acquire Skype.
His theory is somewhat sound. Both companies are giants in Web-based connectivity, with more than 500 million registered users apiece. Skype is taking a page out of the Netflix
However, just because two companies seem to go together like peanut butter and jelly doesn't make it a sandwich. You need bread for that -- and that's something that Facebook doesn't have.
Show me the money
Malik believes that it would take about $7 billion to $7.5 billion to snap up Skype. I actually think it could be less.
Keep in mind that eBay
Telephony is hot. Vonage
Skype is also not as easy to monetize as one may think. Yes, there were 560 million registered users as of this summer, but only 8.1 million of those are actual paying customers. Through the first six months of this year, revenue climbed 25% to $406.2 million, but earnings clocked in at a mere $13.1 million. In other words, this isn't a sexy high-margin business.
Let's split the difference. Suppose we slap a $5 billion price tag on Skype, even though that may still be a bit generous. It's not as if Facebook CEO Mark Zuckerberg can cut a $5 billion check. Some analysts peg Facebook's value at $33 billion, based on recent financing rounds, but that's just a phantom number. Skype investors would have to take Facebook stock, instead of the cold hard cash they could drum up in an IPO. It sounds like a good deal, given Facebook's trajectory -- but it could be a prison sentence when you consider Facebook's reluctance to go public anytime soon.
Telco friend request denied
With Skype in its arsenal, what kind of direction would the Facebook Phone rumor take?
Just last week, Bloomberg was reporting that Facebook already has a smartphone in the works, built on Google's
AT&T is already biting its lip over the Skype and Vonage apps available on Apple
That just won't work.
There may very well be a suitor for Skype before it gets to go public, but it won't be Facebook. It will be a company with deep pockets and the networking -- not social-networking -- leadership to exploit Skype's audience and platform.
Sorry, Malik. My apologies, Facebook. If anyone snatches Skype before it makes its Wall Street debut as a stand-alone company it's going to be Cisco
Does Facebook have everlasting power? Share your thoughts in the comment box below?
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Longtime Fool contributor Rick Munarriz remembers when social networks were an offline endeavor. He does not own shares in any of the companies in this story, except for Netflix. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.