Business Technology

Thursday 21 August 2014

Steve Ballmer questions Facebook's decision to buy WhatsApp

James Titcomb

Published 04/03/2014 | 21:43

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Steve Ballmer

Steve Ballmer, the former chief executive of Microsoft, has questioned the value of Facebook's $19bn purchase of WhatsApp, saying he does not know if the messaging service will make enough money to justify its pricetag.

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Speaking at an event at Oxford University, Mr Ballmer said that having millions of users was often an unreliable indicator of a company's value, and that the measure of a deal's success is whether it creates value for shareholders.

Facebook announced it was buying WhatsApp last month, in a deal that shocked the technology world, partly for the price tag put on WhatsApp. The internet-based messaging app has 450m users who are charged $1 a year, leading to questions over whether the $19bn price tag was justified.

"Sometimes, having a lot of people sign up represents usage, but it's a false metric [of value]," said Mr Ballmer, who was replaced as Microsoft chief executive after by Satya Nadella earlier this year. "Let's take WhatsApp. If your goal was to sell the company they had the right goalset.

"Is it a fad, well probably not. I don't know if it will be successful or not. Will those 450m people ever generate enough revenue? Mark Zuckerberg [Facebook chief executive] believes so and [I have] no reason to doubt.

"But you really have do look at [things] and say 'What is the measure of success?'. In the long run the measure of success is 'Do I make a lot of money for my shareholders?'."

Mr Zuckerberg has claimed WhatsApp is worth significantly more than $19bn, saying it will help billions of people to access the internet.

Reflecting on his 14-year tenure as chief executive, Mr Ballmer, who remains on the company's board, admitted that Microsoft had made "tons of mistakes" and that "we could have done better in the last 10 years", adding that he would have invested more in smartphones if he could re-do the last decade.

However, he claimed that Microsoft was in a strong position to develop the technology of the next "20, 30 or 50 years or more", and hinted at further investment in hardware following the company's acquisition of Nokia, the Finnish mobile phone giant.

"Devices will continue to change so [you ask] do you give up, or do you get ready for the next wave of change?" he said.

"If you really want to bring a vision to market it is helpful to be able to conceive and deliver the hardware and software. And our company's in the position of building new muscle, so that we're not just thinking about building things like tablets.

"Does that mean for sure we'll lead the next generation, no, but we're there working hard to make sure that that next wave, we're there."

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