What Should Facebook, Inc. Do with Its Cash?
Facebook, Inc. (NASDAQ:FB) is a different beast from the cash-strapped Internet companies of the late 1990s. Mark Zuckerberg has transformed his little startup into a global media conglomerate, resulting in huge gains for FB stock.
Facebook brought in $12.0 billion of revenue during the first three quarters of 2015, marking a 40% increase from the same time last year. The income from advertising will continue to grow, as Facebook makes the most of Instagram and WhatsApp. (Source: “Facebook Inc. Form 10-Q Filing,” United States Securities and Exchange Commission, last accessed November 24, 2015.)
However, Facebook is driven by more than its quest for profits. Mark Zuckerberg has a few moonshot ideas like “Internet.org” and “Oculus Rift,” the former of which aims to bring Internet to remote areas of the world via laser-equipped drones and the latter of which offers virtual reality applications through a headset.
Considering that Facebook has built up a solid cash pile, let’s take a look at what the company’s cash could buy. There are the predictable avenues, like buybacks of Facebook stock or dividends, but Mark Zuckerberg has shown that he’s willing to break with convention. Instead, here are seven companies that Facebook could buy with its $15.8 billion of unused cash and marketable securities.
1. Domino’s Pizza, Inc.
If Facebook does step into the food market, Domino’s Pizza, Inc. would make for the perfect acquisition. Many analysts started looking at Domino’s like a technology stock when the company’s app became its defining feature.
More than 10 million people have downloaded the Domino’s app, leading to the company registering 75% of all orders through digital means. That just seems like a Mark Zuckerberg-style of doing business. (Source: “Domino’s ‘Easy Order’ lets you buy pizza by just pressing a button,” The Telegraph, November 23, 2015.)
2. DreamWorks Animation SKG, Inc.
DreamWorks Animation is a behemoth in the movie business, with huge franchises like Madagascar and Kung-Fu Panda in its win column. Facebook could easily buy DreamWorks with its spare cash, which would be a great move for both Facebook and Zuckerberg’s big plans.
The virtual reality headset from Facebook, known as “Oculus Rift,” is set to debut next year. Buying a popular production house would allow Facebook to develop some of its own content to steer people towards the VR headset.