Facebook Profit Drops as Spending Rises on New Features


Facebook Profit Drops Amid Higher Spending on Features, Ad Tools

Net income fell 79 percent to $64 million last quarter as operating expenses jumped 82 percent, Facebook said yesterday. That outpaced a 40 percent revenue gain to $1.59 billion and raised concerns that margins will come under pressure. The stock fell as much as 8 percent as investors weighed near-term lower profit against the prospect of future growth.

Chief Executive Officer Mark Zuckerberg plans to increase expenses, excluding certain costs, 50 percent this year to hire staff and roll out new tools for advertisers. That’s more than the 33 percent increase projected by Pacific Crest Securities LLC, and it underscores the urgency of capturing a bigger slice of the $6.97 billion U.S. mobile-ad market. Done right, the added investment will translate to profit growth, said Adam Schneiberg, a portfolio manager at BTR Capital Management.

Wall Street tends to be forgiving of higher spending during high-growth periods when new products are being built,” Schneiberg said. “As long as eyeballs tune in and revenue keeps growing, the Street will believe that at some point the company can flip the switch on profitability.”

Facebook, based in Menlo ParkCalifornia, retreated 6.9 percent to $29.10 at 9:35 a.m. in New York, and earlier touched $28.74 for the biggest intraday decline since Sept. 24. Through yesterday, the stock had climbed 76 percent from a record low close on Sept. 4.

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http://www.bloomberg.com/news/2013-01-30/facebook-profit-drops-amid-higher-spending-on-features-ad-tools.html

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