Today: Analysts cheer Facebook's big-money purchase of WhatsApp and Facebook's stock price cracks $70 for first time. Also: Hewlett-Packard beats earnings expectations, Tesla hits all-time highs.
The Lead: Facebook reaches records after WhatsApp acquisition
Facebook's stock took a tumble in the initial reaction to the social network's $16 billion acquisition of mobile messaging application WhatsApp, but shares roared back Thursday after analysts gave their approval, pushing the price of the Menlo Park company's stock higher than $70 for the first time.
Facebook committed at least $16 billion and as much as $19 billion or more in its acquisition of the Mountain View company, making it the largest purchase of a Silicon Valley company on record. After falling as much as 3.4 percent Thursday morning, the stock reversed course and moved as high as $70.11 in afternoon trading before closing with a 2.3 percent advance at $69.63, establishing new intraday and closing highs for the firm.
Investors seemed to take their cue from analysts who praised the big-money transaction, as well as reports that Google was also willing to pay a large premium for the five-year-old company.
"Facebook has, with the acquisition of Instagram and WhatsApp, muted the strategic risk of Google acquiring its way into social media and communications in a real way," Stifel Nicolaus Jordan Rohan wrote. "We believe Facebook shares would have been pressured by more than single-digit percentages ... if Google had purchased WhatsApp instead."
Susquehanna analyst Brian Nowak compared the deal to other big Silicon Valley acquisitions of recent vintage and found that the price paid per user was not that far off from those deals.
"$42 per WhatsApp user is only 9 percent higher than what Google bought YouTube for. It is 14 percent more than Facebook paid for each Instagram user. Those acquisitions seemed pricey at the time of the deals too, but they are now key parts of the Google and Facebook ecosystems and monetization stories (which trade at much higher multiples in the public markets)," Nowak wrote.
Macquarie Equities Research analyst Ben Schachter pointed out that the WhatsApp platform could provide access to other services that would boost Facebook's reach.
"While we don't expect messaging to be a meaningful near-term or even long-term revenue driver, the real value could be the evolution of the platform to incorporate new functionality such as payments, app distribution (and) social features," he told Reuters.
Not all analysts were happy with the deal, as two downgraded Facebook stock to the equivalent of a "Hold" rating in the wake of its WhatsApp purchase. Evercore Partner analyst Ken Sena performed one of those downgrades, noting that the "cost of delivering increased engagement is higher than we are comfortable with," but even he admitted that Facebook now has a stranglehold on mobile apps, with Instagram, Facebook's native app, WhatsApp and Facebook Messenger holding down four of the top six spots on the app download lists for both iOS and Android.
SV150 market report: HP beats expectations, Tesla roars to new highs
Wall Street and Silicon Valley stocks followed Facebook's lead Thursday, producing gains as Hewlett-Packard rose ahead of its earnings report and Tesla Motors shot to all-time highs after projecting strong growth in 2014.
HP announced Thursday afternoon that it produced net income of $1.4 billion, or 74 cents a share, on revenues of $28.1 billion in the important holiday-shopping quarter. The Palo Alto tech giant's performance reflected a gain in profits from the same period a year ago and a slight dip in revenues that was still better than the year-over-year decreases that have hampered the personal-computer manufacturer in the past. "HP is in a stronger position today than we've been in quite some time," CEO Meg Whitman said in a company statement on the report. HP shares gained 2.5 percent to $30.19 in Thursday's trading session, and held near that price in late trading after the results were announced.
After projecting strong growth in its earnings report Wednesday, Tesla jumped to record highs Thursday, selling for as much as $215.21 before closing with an 8.4 percent gain at $209.97. CEO Elon Musk gave an interview Wednesday evening to respond to rumors about a possible Apple acquisition that helped Tesla reach all-time highs just two days before, telling Bloomberg TV that he had talked with Apple but that an acquisition of Tesla is "very unlikely" Apple dropped 1.1 percent to $531.15 on the day.
After the bell Thursday, Juniper Networks announced that it has reached a deal with Elliot Management, the New York hedge fund that invested in the Sunnyvale networking company last month and immediately demanded greater investor return and corporate cost-cutting. Juniper, which was also the focus of a rumored takeover by Nokia on Thursday, said it would push $3 billion back to investors in the form of dividends and stock repurchases while undergoing a reorganization that will "result in streamlining its operations and business portfolio." No layoffs were officially announced; Juniper stock gained 0.8 percent to $27.41 in regular trading Thursday and topped $28 in times in after-hours action.
Violin Memory announced Thursday afternoon that it will lay off more than 20 percent of its staff in a reorganization that begins just five months after the Santa Clara data-storage company raked in $162 million in an initial public offering. Violin shares, which have never reached the $9 IPO price on the open market, closed with a 1 percent gain at $3.91 Thursday and reached $4 in late trading.
Mountain View software firm Intuit announced a quarterly loss of $46 million, or 13 cents a share, on revenues of $782 million, the result of a later start to tax season, which the company had already announced would occur; shares closed with a 0.6 percent gain at $73.85 and moved higher than $75.50 in late trading. eBay gained 0.4 percent to $54.96 after naming a new executive who will attempt to share PayPal's software with startups, and Netflix rose 1.6 percent to $434.95 while pleading with its hometown of Los Gatos to let it move into a new headquarters.
Up: Tesla, Nvidia, HP, Facebook, SolarCity, Twitter, SunPower, VMware, Netflix, Yelp, Applied Materials, Pandora, Oracle, SanDisk, Intel
Down: LinkedIn, Apple, NetApp, Advanced Micro Devices, Electronic Arts, Yahoo, Salesforce
The SV150 index of Silicon Valley's largest tech companies: Up 5.4, or 0.35 percent, to 1,559.9
The tech-heavy Nasdaq composite index: Up 29.59, or 0.7 percent, to 4,267.54
The blue chip Dow Jones industrial average: Up 92.67, or 0.58 percent, to 16,133.23
And the widely watched Standard & Poor's 500 index: Up 11.03, or 0.6 percent, to 1,839.78
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.