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Facebook (FB) Retreats Amid Acquisition Rumors

 May 29, 2012 01:04 PM
 


(By Balachander) Facebook Inc. (NASDAQ:FB) is rumored to be considering acquisitions of Norwegian browser maker Opera Software and facial recognition software developer Face.com, weeks after raising $16 billion from its initial public offering.

On Tuesday, shares retreated 7.77 percent to trade at $29.44, down 22.5 percent from its IPO price of $38.

The social networking giant is considering a $1 billion bid for Opera in an attempt to unveil its own browser as well as monetize its mobile offering, according to posts on several technology blogs.

Shares of the Norway-based Opera, which makes browsers for mobile phones, tablets, desktop computers and televisions, shot up nearly 26 percent in Oslo on Tuesday.

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Analysts are of the view that Opera would be such a perfect fit and sensible for Facebook on several levels, and that they reportedly estimate that the social networking site would have to pay a significant premium for the acquisition.

The move would allow Facebook to compete with Google Inc.'s (NASDAQ: GOOG) Chrome, Microsoft Corp.'s (NASDAQ:MSFT) Internet Explorer and also Yahoo Inc. (NASDAQ: YHOO), which recently launched the Axis browser.

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Google already has extensive relationships with Opera, with the search engine giant being Opera's default search partner for Opera Mini and Opera Mobile.

California-based Facebook is yet to monetize its surging user base on tablets and smartphones and those are big roadblocks given the exponential rate of growth in mobile usage over personal computers for the foreseeable future.

The deal might enable Facebook to launch its own smartphone or expand its services that are now available on mobile phones.

Meanwhile, Opera, which claims to have more than 200 million Mobile and Mini subscribers, has been seeking to strengthen its revenue model, though the Opera Mobile and Opera Mini continue to remain the main sources of revenue for its business.

In March 2012, there were over 168.8 million Opera Mini users, a 5.5 percent rise from February 2012. Since March 2011, the number of unique users has increased more than 64 percent, according to its Website.

Facebook has been in spending spree of late, sitting on a big pile of cash. Late April, it agreed to buy 650 patents from Microsoft for $550 million in cash. The latest deal is the second-biggest in the history of Facebook after its deal to acquire photo-sharing app maker Instagram in a cash and stock deal worth $1 billion. Facebook also announced that it will launch an App center in a bid to bolster its presence in the mobile marketing.

Also, there have been speculations that Facebook might acquire Israeli startup Face.com at between $80 million and $100 million.

The widely-anticipated IPO of Facebook is in the news since it went public and that too for all wrong reasons. Since debuting on the Nasdaq on May 18, Facebook shares have been marred by several issues right from technical glitches to lofty valuations.

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