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Facebook's Plan for WhatsApp Hurt Dow's Telecoms Today

By Matt Thalman – Feb 24, 2014 at 9:00PM

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Markets end the session up, but after slight pullback from earlier in the session.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

After charging higher out of the gates this morning, the three major indexes all moved higher by more than 1% during mid-afternoon trading today; but they all slightly pulled back during the final hours of trading. But even after the mild pullback, when the closing bell for the session rang, the Dow Jones Industrial Average (^DJI 2.18%) was higher by 103 points, or 0.64%, the S&P 500 was up 11 points, or 062%, and the Nasdaq had risen 0.69% during the day. Let's take a look at a few of the reasons the market was moving today.

Shares of Facebook (META 7.89%) were higher by 3.19% today as the world listened to CEO Mark Zuckerberg at the Mobile World Congress. Zuckerberg told those in attendance that the plan with WhatsApp is not to make a profit off the acquisition anytime soon, but to continue to let it grow and evolve within the world of mobile messaging. Facebook is looking at the $19 billion acquisition as a long-term play, and will allow the company of only 55 employees to remain a stand-alone business, and rely solely on its $0.99 yearly fee after the first year for revenue, not advertising.

For those unfamiliar with WhatsApp, it's a mobile messaging app that allows users to send and receive text messages, videos, photos, and even voice messages, for free (other than the $0.99 fee per year after the first year). The company plans to move into voice services in the future.

That move, as well as its already popular messaging service, could really hurt the world's large telecommunications companies such as AT&T (T 1.42%) and Verizon (VZ 1.67%). The two receive a massive amount of their profits from voice and messaging services; if subscribers could receive these services for a drastically reduced price from another provider, such as WhatsApp, they more than likely will eventually migrate to the company offering the best value. Investors pushed shares of AT&T and Verizon lower by 1.01% and 2.2%, respectively, today.

As for Facebook and WhatsApp, well, only time will tell whether this purchase, or the plan for messaging, will pay off for all parties; but at this time, investors certainly seem to like Zuckerberg's plan, as shares of Facebook hit an all-time high today. 

Shares of the identity threat protection company LifeLock (LOCK) slid lower by 6.75% today as management released information indicating that whistle-blowers have spoken with the FTC about the company's ability to truly protect its customers. LifeLock claims that it can warn its subscribers when someone performs a credit check or opens an account with the subscriber's information, but whether or not that is actually true is being questioned. This issue has arisen before in 2009 and 2010, so this is not a new problem for the company; but with each occurrence, the legitimacy of the issue in question is likely to be increased. Shareholders are likely in for a rough road ahead. 

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Matt Thalman owns shares of Facebook. The Motley Fool recommends Facebook and LifeLock. The Motley Fool owns shares of Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,589.77 (2.18%) $737.24
Verizonmmunications Stock Quote
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AT&T Stock Quote
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Meta Platforms Stock Quote
Meta Platforms
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LifeLock, Inc. Stock Quote
LifeLock, Inc.

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