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Comment by gitah | Hacker News Reader

At this point, I'm afraid Square is just too expensive to acquire. The company does not have a solid business model: targeting micro-merchants is simply not profitable. And due to all the hype, the acquisition price is going to be very high to cash out all the investors.

Mobile wallet apps have not gained traction and Square marketplace looks like a giant distraction. Square is going to face incredible competition with card readers and POS products from Paypal, Apple, Amazon and Shopify.

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> Mobile wallet apps have not gained traction

"more than 11 percent of transactions a week now happening with a mobile device in our stores, and nearly 10 million customers currently using our mobile app"

http://news.starbucks.com/news/starbucks-accelerates-mobile-...

Seems to be all about proper implementation on both consumer and merchant side.

There's a big difference and scale of problem for open loop mobile wallets and the one that Starbucks has.

Maybe the problem with an universal mobile wallet is that the problem is too hard to solve given the current environment (and dependency on the credit card rails).

The only reason I use the Starbucks app is because of all the free drinks I get. If I didn't get around 1/3 of my drinks for free, there's no way I would go through the hassle of using the app.

As far as I know, you can still carry their plastic card that has the same reward structure. App mirrors the card functionality.

PayPal, Apple, and Amazon are precisely the companies who would have the cash to acquire the company and the desire to do so.

I see Square going to Apple so that they can jump start whatever payments technology they're planning to unleash in the next year. Buying Square's merchants would be an excellent way to do that.

It's also good that their Square register is built on top of an iPad.

At a valuation of a few billion? Tell me what Square could do and Apple cant with those few billions?

Apple, as with its iPhone user base is large enough to offer its own Payment Network to complete with Visa and Mastercard. Although i dont see Apple wanting to do that either.

You overestimate the ability, dedication, vision, and internal political will of top tech companies to enter and dominate fields that are not their core focus.

Remember MobileMe?

Why would Apple destroy their amazing profit margins by buying a company that has razor thin margins at best? There is no chance that Apple will buy Square, they are much more disciplined in terms of watching their financial numbers than that.

Apple has amazing profit margins in their hardware business. Don't forget that they run iTunes and the App Store on razor thin margins and have made that work better than anyone else.

Razor thin? You're terribly mistaken. They take 30% on iTunes and the App Store. Payments company take BASIS POINTS. If you can make 100 basis points, you're doing better than Square or Stripe, maybe even combined.

I'm not mistaken at all. Outside analysis has suggested that iTunes & App Store aren't all that profitable at all[1][2] because they still have to meet the minimum transactions for processing credit & debit cards, which includes a flat fee of up to 25 cents.

[1] http://www.quora.com/Payment-Processing/How-does-Apple-do-pa...

[2] http://bits.blogs.nytimes.com/2008/08/11/steve-jobs-tries-to...

What happens, then? If Square goes out of business, does that hurt Silicon Valley overall? What about if they just continue as a zombie company taking huge amounts of. Only from dumb non vc investors to stay afloat? Or if they ultimately sell for a down amount?

A rushed IPO seems less damaging than these, but not sure if they can pull it off.

Square makes too much money to "go out of business". Worst case is that someone buys them for less than their investors hoped.

"Makes" in the sense of loses/makes negative, yes. (I guess they have positive gross margins, so they could always kill all R&D and then sell the core business to a processor or someone)

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