Tech’s New Feeding Frenzy

TECH’S NEW FEEDING FRENZY  |  As soon as Facebook announced on Wednesday that it would acquire WhatsApp, a text messaging start-up, for up to $19 billion, almost everyone asked the same question: Why? What it boils down to is Facebook’s fear of missing out (F.O.M.O., for you cool kids). “Today, with Google, Facebook and others all fighting for the same customers and wallets, the competition has never been more intense, and big companies have never had to act so quickly â€" and with such conviction â€" to avoid being left behind,” David Gelles writes in DealBook. But the deal has raised fears that, by valuing the number of users above revenue, Facebook is inflating another dot-com bubble.

Indeed, Mark Zuckerberg, the co-founder and chief executive of Facebook, is gambling that his company will someday be able to make huge sums of money from WhatsApp, which has 450 million global users. And perhaps more importantly, Facebook scooped up WhatsApp before its chief rival, Google, could.

Mr. Gelles writes: “In WhatsApp, Facebook sees not a trove of patents or a lucrative advertising model but the future of communications â€" mobile, cross-platform, cheap and international. If the company can increase the number of WhatsApp users and the amount of time they spend with the product, it will theoretically be able to cash in one day. After all, when a product has a billion users, it needs to earn only a few dollars a year from each of them to be a robust business.”

On becoming a leader in global messaging: Facebook’s WhatsApp deal extends the company’s reach in countries like Mexico, German and India and gives it a chance to compete with other messaging start-ups in Japan and China, Mark Scott writes in The New York Times. But the deal “could also lead to increased competition and tension with some of the world’s largest telecommunications operators, like AT&T and Deutsche Telekom of Germany,” he writes.

On winning over WhatsApp’s founders: In many respects, WhatsApp’s founders, Jan Koum and Brian Acton, were the anti-Facebook, Brian X. Chen and Vindu Goel write in The New York Times. “Even as Facebook grows more corporate and more complicated to use,” they write, WhatsApp’s founders “are obsessively focused on just one thing: offering a simple, private, nearly free way for people to share text, photo and video messages with the people they care about.”

Mr. Koum did not provide much explanation for why he agreed to sell WhatsApp to Facebook during a conference call on Wednesday, but did say his company was “excited to benefit from the unique expertise, knowledge and infrastructure that Mark and the team have built out over the last decade.”

On your savings: Facebook’s acquisition of WhatsApp “minted dozens of new millionaires and billionaires this week, but there was another big winner in the deal: Parents and their teenage children, who have most likely saved hundreds or even thousands of dollars in texting fees thanks to the hugely popular messaging app, and will continue to do so after the deal,” Farhad Manjoo writes in the Bits blog.

“There is a larger lesson in this story: When telecom companies control specific protocols on their lines â€" whether it’s texting, voice calls or even cable TV â€" customers lose out. And as soon as our devices get access to the open Internet, we have a bounty of competitive choices that reduce prices and improve service.”

TALK OF THE TOWN  |  From Felix Salmon: “The WhatsApp acquisition is a statement by Zuckerberg that mobile matters more than money. He’s right about that. Without mobile, it doesn’t matter how much money Facebook has. If you’re asking whether Zuckerberg paid too much for WhatsApp, you’re asking the wrong question. Zuckerberg is sending a message, here, that Facebook will never stop in its attempt to dominate mobile â€" that no amount of money is too much.”

From Bloomberg News: “Facebook’s $19 billion purchase of WhatsApp is valuing the text-messaging service at a multiple investors currently only bestow on companies developing life-saving drugs.”

From BuzzFeed: “Noticeably absent from the mounds of coverage of how Facebook’s $19 billion acquisition of WhatsApp came together is any mention of the social network’s chief operating officer Sheryl Sandberg,” Peter Lauria writes. “Her absence, at least publicly, seems to suggest that Facebook chief executive officer and founder Mark Zuckerberg no longer needs adult supervision.”

HEDGE FUNDS TEST OUT ADVERTISING  |  It’s pretty safe to say there won’t be any Super Bowl advertisements for hedge funds any time soon. But thanks to recent changes in Securities and Exchange Commission regulations under the 2012 JOBS Act, which lifted a ban on “general solicitation” of investors, the idea isn’t as far fetched as it once was. Hedge funds, which have long benefited from the appearance of exclusivity, have yet to embrace advertising, but they may be warming up to the idea, Alexandra Stevenson writes in DealBook.

Most hedge funds are reluctant to promote themselves, but these new advertising rules have also presented hedge funds with the opportunity to attract new money from institutional investors like sovereign wealth funds and pension funds. “As a result, hedge fund executives, once more at home discussing their performance in private clubs and at high society events, are having to adjust to a new reality, where they are competing with larger money management firms like Blackstone and Fidelity,” Ms. Stevenson writes.

I.P.O. IN THE LOBBY  |  Bankers have placed countless Seamless orders. Now, these bankers may be the ones filling them. GrubHub Seamless, the restaurant menu and online takeout ordering service, filed a confidential initial public offering on Thursday, joining the ranks of technology companies looking to go public this year, The Wall Street Journal reports. About 28,000 restaurants in 600 cities post menus or allow customers to order takeout through GrubHub Seamless’s websites, which posted more than $100 million in revenue in 2012.

ON THE AGENDA  |  January’s existing home sales numbers are out at 10 a.m. Two regional Federal Reserve presidents give speeches on the economic outlook â€" James B. Bullard, the president of the St. Louis Fed, takes the stage at 1:10 p.m., and Richard W. Fisher, the president of the Dallas Fed, is on at 1:45 p.m. Charter Communications releases earnings before the bell. John E. Herbst, the former United States ambassador to Ukraine, is on CNBC at 8:15 a.m. Meg Whitman, the chief executive of Hewlett-Packard, is on CNBC at 9:05 a.m. The United States men’s hockey team takes on Canada in the Winter Olympics semi-final at noon. Britain faces Canada in the men’s curling final at 8:30 a.m.

FED UNDER FIRE  |  Though Washington is often wary of the Federal Reserve’s policies, these critics “pale next to Wall Street’s,” Peter Eavis writes in DealBook. Fed bashing by vocal financiers is nothing new. “It is in character for certain top Wall Street figures to believe they are smarter than the government employees who have the actual job of fighting unemployment,” Mr. Eavis writes.

“To hear the Fed’s critics tell it, their antipathy toward the central bank is not motivated by a reflexive opposition to government intervention, but by a desire to end the big booms and busts that have hurt the economy in recent decades,” Mr. Eavis writes, adding, “The critics contend the Fed’s near-zero interest rates and huge bond-buying programs have acted a lot like steroids, creating an artificial recovery that could wane as the Fed removes the stimulus.”

WEEKEND READING: NEW MICROSOFT CHIEF’S FIRST INTERVIEW  |  Satya Nadella, the new chief executive of Microsoft, answers questions from The New York Times on leadership and Microsoft’s culture in his first interview since being named to the position. He also discusses playing on his school’s cricket team (to highlight a leadership lesson).

Mergers & Acquisitions »

BBVA Buys Banking Start-Up Simple for $117 Million  |  The online banking start-up Simple, which seeks to distinguish itself from traditional banks by eschewing fees and offering its customers data-rich analysis of their transactions, is selling itself to a giant of European finance.
DealBook »

Two Senior Living Companies to Merge  |  Brookdale Senior Living and Emeritus Corporation, in announcing the $2.8 billion merger on Thursday, said that 6.5 million people 80 years or older will live within 10 miles of a Brookdale community once the deal is completed.
DealBook »

Comcast’s Web of Lobbying and Philanthropy  |  Comcast is beginning a carefully orchestrated campaign, seeking support for its $45 billion merger with Time Warner Cable from members of Congress, state officials and leaders of nonprofit and minority-led groups, The New York Times writes.
NEW YORK TIMES

Modeling the Financial Logic for Facebook’s Huge Deal  |  A new Reuters Breakingviews calculator shows how the social networking giant can bring the messaging start-up’s valuation in line with its own.
DealBook »

Chocolate Maker Russell Stover On Auction Block  |  Goldman Sachs is in the early stages of testing investor interest for the family-owned chocolate maker Russell Stover Candies, the third-largest candy producer in the United States, which could be sold for more than $1 billion, The Wall Street Journal writes.
WALL STREET JOURNAL

INVESTMENT BANKING »

JPMorgan Avoids Third Showdown Over Dimon’s Dual Role  |  JPMorgan Chase avoided a third consecutive showdown with shareholders at its annual meeting in Florida over Jamie Dimon’s roles as both chairman and chief executive of the bank, The Financial Times writes.
FINANCIAL TIMES

JPMorgan Dad Leaves Bank for Biotech to Help Son  |  Ilan Ganot, a hedge fund banker at JPMorgan Chase, left the bank to create a new business model aimed at developing drugs more quickly to help his son, who was diagnosed with Duchenne muscular dystrophy a year ago, Bloomberg News writes.
BLOOMBERG NEWS

R.B.S. Plans Staggering Overhaul  |  The Royal Bank of Scotland is planning to scale back, becoming a much smaller British retail and consumer bank in a move that is expected to reduce staff numbers by at least 30,000 in the next few years, The Financial Times reports.
FINANCIAL TIMES

Fortune Sits Down with ‘Young Money’ Author  |  Kevin Roose, the author of the new book “Young Money,” about the hidden world of junior Wall Street workers, sat down with Fortune to discuss the age of self-doubt, among other topics.
FORTUNE

PRIVATE EQUITY »

Energy Future Holdings Prepares Bankruptcy Filing  |  Energy Future Holdings, one of the largest leveraged buyouts of an American company, is preparing to file for bankruptcy protection, The Wall Street Journal writes.
WALL STREET JOURNAL

Investments in Brazil Rose Last Year, Study Says  |  Despite Brazil’s economic woes, $6.04 billion in private equity and venture capital money was committed to the country last year. Oil, gas and energy were the most sought sectors.
DealBook »

Private Equity Expected to Lead Tech I.P.O.’s  |  Chief financial officers expect private equity-backed initial public offerings to lead technology sector I.P.O.’s in 2014, The Wall Street Journal reports.
WALL STREET JOURNAL

Private Equity-Backed J. Jill Exploring Sale  |  The women’s retailer J. Jill, which is owned by the private equity firms Arcapita Bank and Golden Gate Capital, is considering a sale of the company, The Wall Street Journal writes, citing unidentified people familiar with the situation. Based on a typical multiple of eight times Ebitda for retailers, the company could sell for as much as $500 million.
WALL STREET JOURNAL

K.K.R. Plans Investments in India  |  Kohlberg Kravis Roberts & Company said it is looking for investment opportunities in India including provide financing to distressed firms buying a pool of bad loans from Indian banks, Bloomberg News reports.
BLOOMBERG NEWS

HEDGE FUNDS »

Former Hedge Fund Analyst Charged With Stealing Data  |  The charges against Kang Gao, who worked at the hedge fund Two Sigma Investments, are part of a crackdown by the Manhattan district attorney on suspected violations of cybersecurity.
DealBook »

Activist Begins Board Fight at Abercrombie & Fitch  |  Engaged Capital said that its nominees â€" including a former chief operating officer of J.C. Penney and a former chief executive of Bath & Body Works â€" would introduce much-needed independence to the company’s board.
DealBook »

Herbalife to Make Presentation to Lawmakers  |  The nutritional supplements company will conduct a briefing on Friday to educate congressional staff members about its business in what appears to be an effort to increase its lobbying efforts in Washington.
DealBook »

Juniper Networks Reaches Deal With Hedge Fund  |  The networking equipment company said on Thursday that it had reached an agreement with Elliott Management to nominate two new directors to its board and return more money to shareholders.
DealBook »

Loeb Champions Spirituality in Business  |  “Meditation, contemplation â€" it’s not just for monks and hermits,” Daniel S. Loeb, the founder of the hedge fund Third Point, said at a conference on Thursday, The New York Post writes.
NEW YORK POST

Peltz Renews Call for a PepsiCo Split  |  Trian Fund Management makes its case for a spinoff of the beverages business and says that it will start contacting other shareholders.
DealBook »

I.P.O./OFFERINGS »

Chinese Mobile Game Maker Said to Plan $150 Million U.S. I.P.O.  |  Chukong Technologies, a Chinese maker of mobile games, is said to be seeking about $150 million in an initial public offering in the United States, Bloomberg Businessweek reports, citing unidentified people familiar with the situation.
BLOOMBERG BUSINESSWEEK

Mindbody Collects $50 Million in Last Funding Round  |  Mindbody, which provides scheduling, customer service and payment software to health and beauty companies, announced it had raised $50 million in its last funding round before its expected initial public offering in 2015, The Wall Street Journal writes. The new funding brought the start-ups total to $98 million.
WALL STREET JOURNAL

VENTURE CAPITAL »

Robocoin Unveils First Bitcoin A.T.M.  |  Robocoin introduced on Thursday a Bitcoin automated teller machine in Austin, Tex., the first of what the company hopes will be at least seven such machines in the United State by May, CNBC reports.
CNBC

Bitcoin Aficionados Move Away From Mt. Gox  |  “Bitcoin enthusiasts have begun to wash their hands of Mt. Gox,” The Financial Times writes. “After years when it was effectively the only place to go, they say, it has been exposed as having inadequate technology, a lack of resources to improve technology and poor customer service.”
FINANCIAL TIMES

IBM Watson Chief Joins Silicon Valley Fund  |  Manoj Saxena, the former general manager of IBM’s Watson Solutions, has left IBM to join The Entrepreneur’s Fund, a venture capital firm based in Silicon Valley, Fortune writes.
FORTUNE

Google Ventures Backs 2 Cybersecurity Start-Ups  |  Google Ventures, the company’s growth equity venture capital arm, has backed two cybersecurity start-ups, Ionic Security and ThreatStream, this week, The Financial Times reports. Ionic Security on Thursday announced it raised $25.5 million in a fundraising round, and ThreatStream raised $4 million, both led by Google Ventures.
FINANCIAL TIMES

Investors Flock to China Start-Ups  | 
Corporate investors have been pouring money into Chinese start-ups, with 17u.cn, a travel website, and TutorGroup, an online education platform, reporting funding rounds totaling $82 million and about $100 million in the last week, The Wall Street Journal reports.
WALL STREET JOURNAL

LEGAL/REGULATORY »

Deutsche Bank Settles Dispute for $1.06 Billion  |  The German lender has reached a deal to resolve litigation between the bank and the late media mogul Leo Kirch and his family over the downfall of the Kirch Group in the largest corporate collapse in Germany since World War II.
DealBook »

Buffett’s Business Wire Stops Direct Feeds to High-Speed Traders  |  Business Wire, which distributes press releases and is owned by Warren E. Buffett’s Berkshire Hathaway, announced it would no longer let high-speed trading firms purchase direct access to its service, Bloomberg News writes.
BLOOMBERG NEWS

Obama’s 2015 Budget to Sidestep Bipartisan Offers  |  President Obama’s forthcoming budget proposal will not include an offer to slow the growth in Social Security payments, which was a gesture of bipartisanship that had been part of his strategy to reach a “grand bargain” with Republicans to cut the deficit and reduce spending, The New York Times writes.
NEW YORK TIMES

Ocwen Falls Short With Bond Deal  |  Ocwen Financial raised only $123.6 million compared with the projected proceeds of $136 million in a bond deal backed by a pool of mortgage servicing rights, Bloomberg News reports. The move comes amid increased regulatory scrutiny over the company’s rapid expansion in recent years.
BLOOMBERG NEWS