Recent IPO Shutterfly Will Either Acquire Someone Else, or Be Acquired Soon

You don't raise nearly $100 million just to sit on cash. Shutterfly (SFLY) raised $87 million in its initial offering last week leaving open the question of who they will go after, given the plethora of emerging online photo and video sites out there. Then again, Shutterfly, at less than $400 million in market valuation, may just be an acquisition target for someone else. It doesn't matter that it just debuted. In fact, getting a public valuation is sometimes a precursor to getting bought.

I recall the time when the online payment company PayPal went public, only to do a secondary within months and then cap it all off by selling itself to eBay (EBAY). The ones who truly made money were the investment bankers shuffling around that asset and taking a piece of the pie each time. (My view of bankers is another story.)

I'm not sure which road Shutterfly will take. Nor am I certain that Shutterfly's market valuation is worth buying at these levels.

But Shutterfly will take one road or the other because it's too small to compete with photo services with deeper pockets, such as Eastman Kodak (EK) and Hewlett-Packard (HPQ), and it's too big to remain complacent and small.

For a look at which startups in the photo and video sector might make interesting buys, read my Net Sense column.

SFLY 1-wk chart:

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