Why Apple Buying Facebook Now Makes Sense

NEW YORK (TheStreet) -- The biggest "tell" in what was otherwise a pretty boring Apple WorldWide Developers Conference Monday came during the iOS6 portion of the presentation, when Apple(AAPL) announced full integration with Facebook(FB) .

Unlike most of what happened at the event, this went beyond what was rumored. A system for letting developers integrate their own apps with Facebook is also coming out, and it's now accessible directly from inside the App Store.

All of which got me to thinking:

At its Monday close Facebook is now worth "just" $58.4 billion, a long way from the estimated $100 billion figure talked about before the IPO. It's still pricey -- a price/earnings ratio of 87 -- thus unlikely to hit those heights any time soon.

Some of the investors who came in before the initial public offering, who could sell their shares once the "lockup" period expires, are either underwater or may perceive themselves to be.

Apple still lacks a social network. Its "cloud" is not a cloud at all, but a data center.

Facebook has been building a real cloud, using open source tools, for some time and it has engineers who really understand the need to save money on cloud installations if you want them to last.

My guess is Facebook's investors would jump at a bid of $80 billion. That's a huge premium from the current price.

As of March, Apple had a cash hoard estimated at $97.6 billion. It's continuing to accumulate cash, and its plans for a dividend are not expected to make a significant dent in the hoard. The company's market cap is $534 billion.

So Apple could easily do a half-cash bid for Facebook, acquiring a fast-growing asset with significant cloud presence for less than one-tenth its common stock and less than one-half the cash it has on hand.

Apple's biggest problem is that, insofar as its cash flow is concerned, it's mainly a manufacturing company. That's where its money comes from. That's where its growth comes from. That's why it sports a P/E of "just" 14.5 as against more than 17 for Google(GOOG) .

Facebook is everywhere Apple isn't. It has a big lead over Google in social networking, and in terms of raw cost may become close to competitive in cloud. (Its assets are newer, thus there may be some efficiencies there.)