Facebook reveals profit fall in advance of IPO

Facebook has reported its first quarter to quarter revenue profit slide ever. This was done before Facebook’s IPO which will take place soon which may cast doubt on Facebook’s continued impressive gains.

Facebook blamed the decline on seasonal advertising trends; this was surprising to many on Wall Street.

“It was a faster slowdown than we would have guessed,” said Brian Wieser, an analyst with Pivotal Research Group.

“No matter how you slice it, for a company that is perceived as growing so rapidly, to slow so much on whatever basis – sequentially or annually – it will be somewhat concerning to investors if faced with a lofty valuation,” Wieser said.

Facebook is hoping to raise $5 billion from the initial public offering and could be valued up to $100 billion. Facebook will probably be the biggest internet company IPO in history.

“The biggest issue is the realization that Facebook is not going to have an easy time meeting high expectations of the public market,” said Jeff Sica, chief investment officer of SICA Wealth Management, which manages more than $1 billion in client assets, real estate and private equity holdings. “It will affect how people look at the IPO.”

Sica continued by adding that many are still interested in the IPO and will sign up in mass, but many will be less likely to hold on to the shares in the long term.

“I’m still encouraging people to participate in the IPO, under the acknowledgement that it could be a bumpy ride,” Sica said. “There are high expectations and I hate high expectations.”

The company was founded in 2004 by Mark Zuckerbeg in Harvard University  his dorm room; it has since risen up to  900 million users during the first quarter. It has also hired new workers in the amount of  1,000, amounting to  3539 employees.

Net income slide from $233 million to $205 million a year earlier. Facebook said that the seasonal trends cased the effect and was mostly not as visible in the past years due to high growth. Now that the market has seemed to fill out more, these trends will be more noticeable.

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