Facebook Shares Plummet in an Earnings Letdown

Article excerpt

SAN FRANCISCO - Unhappy with Facebook's first financial report as a public company Thursday, investors fled the stock in droves even as Mark Zuckerberg, the company's chief executive, extolled its growth prospects to industry analysts.

Facebook's stock lost 18 percent of its value Thursday. The first blow came during regular trading largely because of the poor results posted by Zynga, the social game company that uses Facebook as a platform.

But the stock continued to plummet in after-hours trading after Facebook announced its own numbers, dipping below $24, a record low. Since going public two months ago at $38 a share, Facebook shares have lost 37 percent of their value.

Mr. Zuckerberg has rarely spoken publicly about the company he built in his dorm room eight years ago. But nothing he and his lieutenants said Thursday about their plans to make money by advertising to Facebook users seemed to reassure investors.

"Obviously we're disappointed about how the stock is traded," said David Ebersman, the chief financial officer. "But the important thing for us is to stay focused on the fact that we're the same company now as we were before."

The financial report for the company's second quarter did contain some good news. Revenue was up 32 percent, beating analysts' predictions. But profits were not impressive, and the total number of users inched up only slowly.

"With the unprecedented hype around the company's I.P.O., some investors believe more upside would have materialized - higher revenues, higher earnings," said Jordan Rohan, an analyst at Stifel Nicolaus.

During the call with analysts, company executives emphasized their efforts to make Facebook accessible on mobile devices. The company only recently started surfacing advertisements in the mobile newsfeed. And while company executives said they were seeing promising results, they also said they were being careful not to crowd the mobile platform with too many advertisements, lest it spoil the user experience.

The company said 543 million people looked at Facebook on their mobile devices at the end of June, a 67 percent jump from last year.

"The shift towards mobile is incredibly important," Mr. Zuckerberg said during the call.

The company said its revenue for the quarter climbed to $1.18 billion, from $895 million; most of it came from advertising. The company reported a net loss of $157 million, or 8 cents a share, compared with net income of $240 million, or 11 cents a share for the same quarter last year. Much of that was because of stock compensation, and on an adjusted basis, the company posted a profit of 12 cents a share, or $295 million, meeting analysts' expectations.

Facebook, which already has nearly a billion users worldwide, is facing an inevitable slowdown in growth. The real issue, analysts have said, is whether the company can keep users glued to the site and profit from them by offering targeted advertisements, particularly on mobile devices. …