Facebook reports big boost in sales and profit, departure of CFO

Posted: 04/23/2014 01:25:04 PM PDT

Updated: 04/23/2014 01:27:36 PM PDT

MENLO PARK -- Social networking company Facebook on Wednesday posted first-quarter earnings that beat Wall Street's expectations and showed continuing strong growth in the company's revenue, particularly from advertising.

The company's $2.5 billion in sales were up 72 percent from the first quarter in 2013 and its $642 million profit was nearly triple what it had been a year ago. That worked out to fully reported earnings of 25 cents per share.

Analysts surveyed by Thomson Reuters generally had expected fully reported earnings of 17 cents per share on sales of about $2.36 billion.

Advertising for the quarter totaled $2.27 billion, an 82 percent increase from a year ago.

'Facebook's business is strong and growing, and this quarter was a great start to 2014,' said CEO Mark Zuckerberg in a press release. 'We've made some long term bets on the future while staying focused on executing and improving our core products and business. We're in great position to continue making progress towards our mission.'

Zuckerberg has been pushing hard to earn more money from ads that appear on smartphones and tablets, and the strategy has been paying off. Mobile ads helped Menlo Park-based Facebook pass Yahoo last year to become the No. 2 seller of online advertising in the United States, after Google, according to research firm eMarketer.

Valuing the worldwide advertising business at about $600 billion a year, Sterne Agee analysts concluded in a recent note to their clients that 'Facebook is rapidly becoming a key player in this large market.'

Some experts also have cheered the $19 billion that Facebook agreed in February to pay for online-messaging service WhatsApp and the $2 billion deal it announced in March for virtual-reality company Oculus, saying those purchases eventually could prove lucrative. They note that Instagram, the mobile photo-sharing service that Facebook bought two years ago for $1 billion, has seen a big increase in users since it was bought.

Commenting on those three acquisitions, Cantor Fitzgerald analysts recently said they 'remain impressed with management's intense focus on trying to position Facebook for the next computing platform.'

But other industry observers wince at the staggering price of the deals, fearing Facebook may be straying beyond its core business, and others worry that teens are abandoning the company for newer online services like Snapchat.

Facebook also has been slow to win ad dollars from video commercials and it faces threats from a variety of rivals. Moreover, researchers at Adobe have found that social networking sites such as Twitter, Pinterest and Yahoo's Tumblr are seeing faster growth in the number of users who follow links on those sites to online retailers.

'The inherently open nature of the web increases the ease with which a competitor could approach and capture a portion or all of Facebook's consumers or fee-payers,' warned the Pivotal Research Group in a recent report. 'Google and other companies will persistently nip at the heels of Facebook, looking for points of entry to capture a share of Facebook's market opportunity.'

Contact Steve Johnson at sjohnson@mercurynews.com or 408-920-5043. Follow him at http://ift.tt/1fGGKSP