Redstone: Facebook too rich


facebook

A report from Reuters indicates that Viacom, Inc. (NYSE:VIA) Sumner Redstone is not bidding on Facebook, the highly popular social networking site.

True, Redstone admitted that it was a huge mistake to let MySpace go to News Corporation (NYSE:NWS). But, then again, this should not cloud good thinking on future deals.

Simply put, Redstone thinks the price tag on Facebook is at nose-bleed levels.

The rumor is that the price tag is about $1 billion – and that Yahoo! Inc. (NASDAQ:YHOO) is expressing interest in the deal, as well as Microsoft Corporation (NASDAQ:MSFT).

Actually, a recent piece from Wharton has a look at the valuation metrics for Facebook; with the realization that, at least for academics, it's pretty tough to come up with any sensible price tag for Facebook.

First, the company is in the early stages of a new market. Is it really a fad?

And what about competitors? Or what if Facebook makes some blunders (such as its recent problems on privacy)?

Besides, while Facebook has a big user base and strong brand, the fact remains that it is far behind the mammoth MySpace, which has more than 90 million active users and has attracted a $900 million deal from Google.

So what does Wharton think Facebook is worth? Like many academics, it was a bit fuzzy.

But, for those who need to make these kinds of decisions, Redstone thinks its definitely too expensive.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

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Last updated: February 12, 2012: 07:03 PM

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