What Does Facebook Want With Maps?

It seems Facebook (NASDAQ:FB) may have already traveled a ways down the road towards its purchase of the tech company Waze, but the price it could pay might not make the deal worthwhile.

Last week, Facebook released its earnings, which beat some estimates but fell below others. In the case of revenue, Facebook earned $1.46 billion, which was a 37.81 percent increase from the year-earlier quarter. Considering that average estimates for Facebook’s revenue were $1.44 billion, the social network beat estimates in this area.

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Earnings per share were another story. Analysts had estimated Facebook would bring in earnings of $0.14 per share, but even though it had higher revenue than expected, Facebook’s earnings only came out to $0.13 per share. Despite this, the stock went up after the earnings call. Shares peaked at around $29 at the markets close last Thursday and slide down more than $2 in the past week, settling back up to just over $27.

Before the earnings call, it seemed that Facebook had 5 important things it had to show to appease investors: mobile strength, revenue growth, a steady influx of users — not an exodus — products everyone wants, and a better balance of spending and earnings. Based on investors’ reactions over the past week, it would appear Facebook didn’t cover all of its bases.

Now, Facebook may be close to buying a mapping start-up for a hefty price. The company in question is Waze, which uses satellite signals from users’ phones to create maps and traffic information that can then be shared with other users to create an up-to-the-moment representation of road conditions.

Facebook and Waze already have some history together. In October 2012, they partnered up to allow Waze users to share information about their drives on Facebook with their friends. Now, Facebook and Waze’s partnership could get a lot closer.

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The potential acquisition was reported on by the Isreali business newspaper Calcalist, and it said that the¬†acquisition talks had begun about 6 months ago — around the time Facebook and Waze first partnered up — and that now the process of due diligence was underway, as a term sheet has already been signed. The purchase was estimated to be between $800 million and $1 billion.

At those values, it would cost Facebook more than half of the quarterly earnings reported last week. It would also be the third Israeli company Facebook acquired, following Snaptu and Face.com in 2011 and 2012, respectively. However, those 2 were relatively small acquisitions, whereas Waze could bring in a major influx of users, since its user base recently topped 45 million, with 1.5 million users joining in March alone. Though expensive, it could be a beneficial deal for Facebook.

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