Opera Software shares soared over 20 per cent on Tuesday on talks that Facebook was in discussion to buy the firm, while analysts said competition from Google and others could push the price tag of any deal over $1 billion.
Shares of Oslo-listed Opera, coveted for its advanced mobile phone software technology, jumped as much as 26 per cent, valuing the firm at over $800 million.
Opera's mobile technology, along with 170 million Opera Mini users, give the firm extensive commercial relationships with mobile phone manufacturers and operators.
Facebook has struggled to convert its rapidly increasing traffic from mobile platforms to revenue, and purchasing Opera would be a faster solution than building its own platform or browser, analysts added.
"Opera would be sensible for Facebook on several levels as it would enhance the now limited mobile experience of Facebook, improve Facebook's mobile monetization problem, help Facebook retain online game developers leaving the social network over a lacking mobile platform and further improve Facebook's ability to target ads," Arctic Securities said.
It would be such a perfect fit for Facebook, analysts said it would have to pay a hefty premium.
DNB, Norway's top bank, said the price would have to be double Friday's closing level, or 68.6 crowns, valuing the firm at $1.35 billion, while Danske Bank predicted a price between 50 and 60 crowns a share, or between $1 billion and $1.2 billion.
Opera officials have repeatedly declined to comment.
Still, several obstacles remain.
Opera founder and top shareholder Jon S. Von Tetzchner said the firm should focus on organic growth.
"I want Opera to focus on growth and delivering good results; there are big opportunities for Opera," Tetzchner, who holds 10.9 per cent of Opera told Reuters. "We have been promised 500 million users by 2013 and I think that's a good goal and the firm should keep going for it."
"I personally think that an ARPU (average revenue per user) goal of $1 is even modest," he said. "I am not pushing for a takeover."
Tetzchner said he was not aware of a bid and had not decided how he would react to one but added it would be "undemocratic" for him to try to block it if others supported it.
Another obstacle could be Google, which has extensive relationships with Opera.
"A takeover by Facebook will likely send cold water down Google's spine," Arctic Securities said.
Google is Opera's default search partner for Opera Mini and Opera Mobile worldwide outside Russia/CIS, making the firm a key relationship for Google.
If the firm continued to grow organically, it would be able to maintain several parallel relationships with firms like Facebook and Google so if one of them wanted full control, the premium would have to be hefty, analysts added.