March 2014 Client Letter
Is rampant speculation bubbling under the surface of today’s stock market? In February, Facebook announced its purchase of WhatsApp, a company with $20 million in sales that was nonexistent before 2009, for $19 billion in cash and stock. WhatsApp is a mobile messaging platform allowing users to send text messages without having to pay for SMS. If you own an iPhone, Apple’s iMessage program basically does the same thing. Seems like a large sum of money for a company whose product appears to be easily replicated.
Then in March, Facebook decided to buy virtual-reality firm Oculus for $2 billion. Oculus is a 20-month-old maker of virtual-reality goggles. Oculus doesn’t yet sell a product that is available to consumers. To date, the firm’s only revenue comes from a prototype sold to developers.