The Case for Apple Buying Facebook

Cupertino has $51 billion to spend. That puts the social network in striking distance.

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Is Apple looking to acquire Facebook? Peter Kafka at All Things Digital is advancing the idea following the company's live earnings call Monday. No doubt, Apple seems poised to make a major acquisition given its whopping $51 billion in cash. And Apple CEO Steve Jobs's statement that the company's in a "unique opportunity to take advantage of... very strategic opportunities" adds fuel to the speculation. After the earnings call Kafka said "I don’t remember Jobs ever signaling his desire to go shopping quite as openly as this before." He goes on to speculate that a Facebook purchase is in the works:

It’s hard not to read or hear that quote and not think that he’s thinking about some very big buys... Feel free to throw your own guesses in, but I’ll kick off with my own: It’s a company that has yet to compete with or brush up against Apple in any significant way. And it’s one that Apple seems unlikely to be able to move aside, even if it wanted to. And it’s one that’s already competing directly with Google, which has to make Jobs like it even more. And, if you believe this L.A. Times report, Jobs is already strolling around Palo Alto with its CEO: What do you think of Apple buying Facebook?

For mergers and acquisitions fiends, the prospect of a Facebook purchase was too tantalizing not to weigh in on. Here are the cases for and against this actually happening:

Jobs and Facebook founder/CEO Mark Zuckerberg met for dinner the other day. Many presumed that they were discussing Facebook Connect and Ping integration, but what if it were something more, like Apple buying Facebook? ...

What would Apple buying Facebook lead to? Every Facebook user would probably automatically have an iTunes Store account. FaceTime chat could be integrated into Facebook chat, potentially leading to increased sales of iOS devices. If Apple continues down the road of using not only phone numbers, but email addresses and eventually Facebook IDs as designated FaceTime "phone numbers," then 500 million users would already have a FaceTime ID to use when all telephony goes VoIP.
If Facebook has the option of going public for between, say, $35 and $40 billion, next year, Apple could cover that. That would certainly qualify as a “strategic opportunity.” Just as Apple has struggled to compete with Google’s web services, Google has been trumped in social networking by Facebook. Jobs and Zuckerberg have even been seen together, Kafka notes. Ostensibly that involves finding a way to integrate Apple’s Ping music discovery service with Facebook.
  • No, Apple Only Buys Companies It Can Absorb, writes Tim Barribeau at Everything Cafe:
I just can’t see it. Yes, Apple has $51 billion tucked away for purchases, and yes, Steve Jobs mentioned that Apple has a very specific shopping list in mind, but picking up Facebook? Why? Apple’s purchases have historically been about absorbing skills, expertise, and patents, and then folding those into Apple’s various OSs. They pick up a company with experience in music streaming, and we all hope that is coming out soon. Apple could never absorb Facebook like that, it would have remain a separate entity, just owned by Apple. Sure, they both have a common foe in Google, but I doubt Apple would purchase Facebook.

Not only would it take a huge chunk out of Apple’s cash pile, but it would prove a massive distraction from Apple’s main lines of business, and its contribution to Cupertino’s core interests would be negligible. I can see Jobs wanting to acquire some social networking IP to bolster its efforts with Ping, but buying Facebook to accomplish that would be like swatting a fly with a nuclear bomb.

No, Apple’s acquisitions will be focused on providing its mobile products with key competitive differentiators. That means battery, streaming, and radio tech. ... This is where the fight on the horizon is in the mobile sector, and this is where Apple’s many guns will be pointed when the battle comes.

This article is from the archive of our partner The Wire.