Facebook shares fall 10pc in after-hours trading on maiden results
Facebook shares slumped to a record low after the social network site's first results as a public company showed its growth has slowed.
Mark Zuckerberg created Facebook in a Harvard dorm room.
By Richard Blackden, and Andrew Trotman
11:20PM BST 26 Jul 2012
The Californian company had been under intense pressure to deliver strong results given the almost 30pc drop in its share price since the $104bn (£66bn) flotation in May.
Although revenues climbed 32pc to $1.18bn in the second quarter, beating analysts' estimates, it failed to convince investors who had seen saw revenues climb 45pc in the first quarter. At the same time its spending on sales and marketing more than tripled to $392m in the period.
As had been forecast, the cost of share-based pay plan for employees saw Facebook report an overall loss of $157m for the quarter. But as founder and chief executive Mark Zuckerberg made an appearance on the company's conference call with Wall Street analysts on Thursday night, the focus was squarely on how quickly the social network site will be able to drive revenues.
"They've got a real business there," said Daniel Ernst, an analyst at Hudson Square Research. "It's just not growing as fast as it used to."
Mr Zuckerberg and Sheryl Sandberg, Facebook's highly-regarded chief operating officer, were at pains to stress that the company had introduced several initiatives to squeeze more revenue from a base of users that grew 29pc to 955m by the end of the quarter. That included the launch of advertising known as "sponsored stories" in the newsfeeds that Facebook users get when they access their accounts. By the end of June, they were generating about $1m a day in advertising, with half of that coming from mobile devices, said Ms Sandberg. Total advertising revenues rose 28pc to $992m in the quarter.
The ability of users to recommend, or "like", products to other friends on the site has always been seen as a potential goldmine for Facebook. Having long resisted taking Facebook public, Mr Zuckerberg did so at a time when millions of people are now using a mobile device, rather than a PC, to access the web. A central concern of investors is whether Facebook can make enough money from advertising on mobile devices, and the 28-year-old billionaire admitted that "there are a lot of challenges". However, he denied reports that Facebook was consdering building its own phone, arguing it "wouldn't make much sense for us".
Having sold shares at $38 each on May 17, they tumbled as much as 12pc to $23.75 in extended trading in New York. David Ebersman, Facebook's chief financial officer, said that "we are disappointed how the stock is trading".
Amazon shares also tumbled on Thursday night after the world's largest internet retailer's second-quarter profits fell short of Wall Street's estimates. Profits dropped to $7m in the period from $191m in the same quarter last year as Amazon stepped up spending on warehouses and its Kindle Fire tablet lost market share.
+-+Facebook+shares+fall+10pc+in+after-hours+trading+on+maiden+results.jpg "Mark Zuckerberg created Facebook in a Harvard dorm room")