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Facebook Profit Dip

Posted: April 26th, 2012 | Author: | Filed under: Facebook | Tags: , , , , | Comments Off on Facebook Profit Dip

Facebook Profit DipFacebook has reported a fall in quarterly profit despite surging revenue. The social networking behemoth recently bumped up spending on research, acquisitions and promotion before its stock market debut, which is expected to come next month. The company also blamed the result on seasonal advertising trends.

Facebook’s net income dipped 12 per cent to $US205 million in the three months to March from $US233 million in the same period last year.

Although revenue jumped to $US1.06 billion, which was a rise year-on-year, it was down about 6 per cent from the preceding quarter, the first quarter-on-quarter drop since at least 2010.

Facebook is preparing to raise at least $US5 billion in the largest initial public offering by an internet company on Wall Street that could see it valued at up to $US100 billion.

The company will trade under the symbol “FB” on the Nasdaq, it said in paperwork filed with the United States Securities and Exchange Commission ::::

Last year, Facebook reported net income of $US668 million, with revenue nearly doubling to $US3.7 billion in 2011, most of which came from targeted advertising gleaned from personal information shared by the hundreds of millions of users of the platform.

“The biggest issue is the realisation that Facebook is not going to have an easy time meeting high expectations of the public market,” Jeff Sica, chief investment officer of SICA Wealth Management, said.

Investors are still likely to sign up in droves for the IPO, however growth concerns may make some investors less likely to keep the stock in the long term, he added.

Sluggish Advertising

The company, founded by Mark Zuckerberg in a Harvard University dorm room in 2004, passed 900 million monthly active users in the first quarter, according to the SEC filing.

Facebook also disclosed that it has agreed to pay Instagram $US200 million if its recent deal to buy the photo-sharing start-up for about $US1 billion does not go through.

Spending roughly doubled over the past 12 months, outpacing the 45 per cent revenue increase during the period, it said.

Facebook said its advertising business, which accounts for the bulk of its revenue, typically slows in the first three months of the year.

Rapid advertising growth may have “partially masked” such trends to date, and seasonal impacts may be more pronounced in the future, it noted.

Apart from slowing growth, Facebook is grappling with other issues.

Yahoo is suing it for patent infringement as it tries to beef up its intellectual property arsenal. On Monday, it said it would pay $US550 million for hundreds of patents from Microsoft.

Facebook is the leading social network in all but six countries, notably China and Russia. Its value has been estimated at between $US75 billion and $US100 billion.


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