Is Facebook outsourcing to boost IPO?

A new office in India is billed as a way to boost support, but could be a way to increase margins for Facebook's IPO in the coming months

By Louis Navellier Mar 15, 2010 10:43AM

Louis navellier facebook IPOSocial networking company Facebook announced this morning that it has set up shop in Hyderabad, a city of about 4 million southern India. The new office will have online sales and operations teams, according to a an executive’s post in Facebook’s official blog.


The company is trying to wave off concerns that it is sending tech jobs overseas, pointing to a similar expansion in the states with a new office in Austin, Texas. Facebook also claims that support centers in a variety of time zones provides better service to its worldwide customer base and allows for multi-lingual support.


But with the Web business reportedly looking for a way to go public and prove its worth to investors, a move towards outsourcing to reduce costs may seem attractive to Wall Street. This move could be a sign that Facebook is streamlining operations in preparation for an IPO.

Now, I know that the Facebook IPO has been a long time coming and many are wondering if it will ever come to pass. A tech blogger at The Wall Street Journal recently equated the phenomenon to investors’ version of Waiting for Godot. But most tech industry insiders anticipate an IPO in 2011, if not later this year, with a value of the company anywhere between $50 and $100 billion.


Social media is obviously a hot topic among business folks these days. Whether you’re talking about the ability to leverage sales for your business through sites like Facebook and Twitter or whether you’re talking about your chance to share in the profits of this booming industry as an investor, this technology should be on everyone’s radar.


That said, many on Wall street are wary that the Facebook IPO won’t live up to the hype and that this stock will become the latest Internet gem that turned out to be a just a shiny rock -- a la AOL (AOL). After all, look at how MySpace.com flopped after pretty much starting the Web 2.0 social media phenomenon.


Nobody knows how big the profits will be once Facebook actually goes public, and it’s impossible to know how long the ride will last. But Facebook’s move to put a small team in Hyderabad, India, could be the first step towards outsourcing some services to boost margins. That could pique investor interest and make the stock look a bit more legitimate when a Facebook IPO actually comes to pass.


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