Russian Facebook rival eyes 2012 stake sale, IPO

Wed, Jan 25 06:12 AM EST* Vkontakte.ru eyes 3 pct stake sale to boost valuation* Sees potential IPO in 2012 or 2013* Mail.ru is a near 40 percent shareholderBy John BowkerMOSCOW, Jan 25 (Reuters) - Russia's biggest social network Vkontakte.ru may sell a small stake ahead of an initial public offering in 2012 or 2013, its co-founder told the website Gazeta.ru, as it seeks to cash-in on the huge popularity of Russian internet IPOs.The search engine Yandex and the internet group Mail.ru have raised nearly $2.5 billion in New York and London between them in the past 15 months, a quarter of the total raised in all Russian IPOs since the 2008 financial crisis."We think it will be possible to proceed with an IPO in 2012 or 2013," the website's founder Pavel Durov told Gazeta.ru."We may sell a small stake -- around 3 percent -- before the IPO in order to increase the market capitalisation of the company," he said, adding there were no ongoing talks to sell the stake to Mail.ru, Yandex or Google.Durov would not comment on how much the company wants to raise or whether it was in talks with investment banks.Vkontakte.ru, known as Russia's answer to Facebook, is 39.9 percent owned by Mail.ru, and is therefore likely to need the support of its biggest external investor were it to proceed with the float.Mail.ru offered to increase its stake to over 50 percent last year in a deal that would have valued the company at $3.75 billion, according to business daily Vedomosti, but Durov and his co-founders did not want to give up a controlling stake.Mail.ru could not immediately be reached for comment, while Vkontakte did not respond to e-mailed inquiries.MORE POPULARDavid Ferguson, an analyst at Renaissance Capital, said Vkontakte.ru could be valued at anything between $1.5 billion and $3 billion, depending on the model used. He added that an acquisition by Mail.ru would generate cost savings as the two companies could share web-hosting operations.Vkontakte.ru says it has over 100 million registered users and 33 million unique visitors a day, although it is also known to have an issue with spam and with internet piracy.It generated revenue of $93.8 million in 2010, the last available period for financial figures.Internet firms have proven more popular with foreign investors than other Russian private companies as they are seen as immune to country-specific risks such as corruption, investors told Reuters last year.Russia has also fast become Europe's biggest online market, overtaking Germany in terms of number of unique visitors online, according to internet monitor Comscore.The high profile of the Yandex and Mail.ru IPOs have echoed the heavy interest in online floats in the United States, including online games maker Zynga and professional network site LinkedIn.However Yandex shares have halved since the first day of trading following its blockbuster Nasdaq IPO last May, while Mail.ru's stock is down around 20 percent from its peak.Facebook Readies IPO FilingMorgan Stanley Seen Leading Deal Valuing Giant at $75 Billion to $100 Billion================By SHAYNDI RAICE and RANDALL SMITHFacebook Inc. could file papers for its initial public offering as early as next week, people familiar with the matter said, as anticipation mounts for what is likely to be one of the biggest debuts for a U.S. company.The deal, seen as defining moment for the latest Web investing boom, could raise as much as $10 billion and value the social network between $75 billion to $100 billion, said people familiar with the matter. A valuation of $75 billion would be below earlier expectations.The website, which in less than eight years has attracted more than 800 million members, has changed the way people across the globe communicate, from organizing political protests to sharing baby pictures. Facebook could file IPO paperwork as early as Wednesday of next week, and Morgan Stanley is close to winning the "lead left" position in the IPO. Facebook has been valued between $75 and $100 Billion dollars.The Internet giant is close to picking Morgan Stanley to lead the deal, these people said. Wall Street banks, many of them struggling amid a crimp in trading profits, have been jostling for a leading role in the deal, which could yield them tens of millions of dollars in banker fees, potential new business and bragging rights.A nod(To lower and raise the head quickly, as in agreement or acknowledgment.) for Morgan Stanley would mark a disappointment for rival Goldman Sachs Group Inc., which a year ago was viewed as having an edge to lead the deal. One person familiar with the matter said that while Morgan Stanley would likely land the coveted "lead-left" spot on an IPO financial filing, Goldman would also likely play a significant role.Spokespeople for Facebook, Morgan Stanley and Goldman Sachs declined to comment.Facebook could file documents with the Securities and Exchange Commission as early as this coming Wednesday, said one person familiar with the matter. But that timing is just one scenario Facebook executives are considering, the person said. Executives are also considering filing a few weeks later, the person said.Journal CommunityFacebook's RiseSee a timeline of key events in Facebook's history.View InteractiveFacebook in PhotosView SlideshowKimihiro Hoshino/Agence France-Presse/Getty ImagesFacebook CEO Mark Zuckerberg delivered a keynote during the Facebook f8 Developer Conference in September.Who's Who at FacebookRead about the company's top executives.View InteractiveIPO: Go, No-Go?Track the performance of some notable initial public offerings—the highfliers and flame-outs—of past and present.View InteractiveMore photos and interactive graphicsRelatedFacebook's Goal: To Be a Blue Chip (12/22/12)Is Facebook Ready for the Big Time? (1/14/12)Facebook's Investors Poised for JackpotMarketBeat: NYSE, Nasdaq Battle For Big Kahuna Of Stock ListingsDeal Journal: Bragging Rights at Stake for UnderwritersMorgan Stanley SharesWhat Is Facebook Worth?People familiar with the matter have said the company is targeting an IPO sometime between April and June.A $10 billion Facebook offering would rank fourth among IPOs for U.S. companies, behind Visa Inc., General Motors Co. and AT&T Wireless, according to Dealogic. It would rank Facebook as the biggest U.S. Internet offering ever, replacing Google Inc., which raised $1.9 billion in 2004 at a $23 billion valuation.At a $100 billion valuation, Facebook would be worth about the same as McDonald's Corp. and nearly half of Google.Facebook's revenue is driven by its advertising business, as big brands rush to the site to interact with consumers through display ads and fan pages. Facebook has been able to increase its world-wide advertising revenue from $738 million in 2009 to $3.8 billion in 2011, according to estimates from research firm eMarketer. It isn't known if Facebook is profitable.Facebook's final valuation will be determined by a variety of factors, people familiar with the matter said, such as investor demand for social media, the IPO market and the health of the European economy.The IPO will mint a new generation of Silicon Valley millionaires on the level not seen since Google's offering. Some 3,000 people work at Facebook.An IPO will also test the ability of Chief Executive Mark Zuckerberg, age 27, to manage a global company whose financial performance will be scrutinized every three months by investors. Mr. Zuckerberg started the company in 2004 out of his Harvard University dorm room. Overall, about 500 million users now log into the site daily, according to Facebook.Mr. Zuckerberg had been reluctant to push forward with an IPO. People familiar with his thinking said he has been fearful of the damage an IPO could do to the company's culture. He wants employees focused on making great products, not the stock price, they said.But outside forces are partly pushing his hand. Facebook executives began to realize in 2010 that Facebook would have more than 500 shareholders by the end of 2011, which would trigger a regulatory requirement that Facebook start publicly reporting financial information.Mr. Zuckerberg decided it made more sense for Facebook to go public and reap some financial benefit from an IPO, rather than stay private but have to release its financial information, said people familiar with his thinking.Leading the Facebook sale would be a huge win for Morgan Stanley, which last year cemented its position as the top Internet stock underwriter by leading the IPOs of LinkedIn Corp., Groupon Inc., and Zynga Inc. The bank's global tech banking team, led by Michael Grimes and Paul Chamberlain, is also based in Menlo Park.Facebook would cap a recent wave of Web IPOs, some of which have struggled amid growing investor scrutiny of the new Internet companies. But investors and analysts said now could be a good time for a Facebook offering.EXPERIENCE WSJ PROFESSIONALEditors' Deep Dive: Companies Navigate Toward IPOsNATIONAL POSTMint's New IPO Turned Out to Be a Gold MineLOS ANGELES TIMESWall Street Clicks 'Like' on IPOPRIVATE EQUITY MANAGERSEC Sheds Light on Foreign IPOsAccess thousands of business sources not available on the free web. Learn MoreThis year, the overall market has risen, and on Friday other Internet stocks rallied on news that Facebook would soon file for a deal. "The excitement around Facebook is still enormous," said Max Wolff, an analyst at GreenCrest Capital, which researches companies going public.The recent IPO climate "hasn't been particularly strong," said Peter Falvey, co-head of the technology banking group at Morgan Keegan & Co. But Mr. Falvey added that with "the recent stock market strength and maybe some green shoots in the economy, there could be a fortuitous window for Facebook."Write to Shayndi Raice at shayndi.raice@wsj.com and Randall Smith at randall.smith@wsj.com======================Facebook files to raise 5 billion USD in IPOEnglish.news.cn 2012-02-02 07:56:44 SAN FRANCISCO, Feb. 1 (Xinhua) -- Facebook on Wednesday filed to raise 5 billion U.S. dollars in a preliminary public stock offering (IPO), one of the largest technology offering so far.According to its filing with the U.S. Securities and Exchange Commission, Facebook now has 845 million users and 463 million daily users. It has annual revenue of 3.7 billion U.S. dollars, 1. 8 billion dollars in operating income and 1 billion dollars net income.The world's largest social network chose to file IPO at its eighth birthday and the filing sets the stage for it to go public in May, perhaps the most anticipated financial events in Silicon Valley in recent years.In its filings, Facebook said it plans to raise 5 billion dollars, which analysts said will likely change in an IPO that could value the company at between 75 billion to 100 billion dollars.In a letter to investors included in the filings, Facebook founder and CEO Mark Zuckerberg said that Facebook "was not originally created to be a company. It was built to accomplish a social mission -- to make the world more open and connected.""We think it's important that everyone who invests in Facebook understands what this mission means to us," he wrote.Regarding business, Zuckerberg said "we think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services ... As people share more, they have access to more opinions from the people they trust about the products and services they use.""This makes it easier to discover the best products and improve the quality and efficiency of their lives," he said.===============Facebook's Zuckerberg to keep iron grip after IPOThu, Feb 02 01:11 AM ESTBy Alexei Oreskovic and Sarah McBrideSAN FRANCISCO (Reuters) - Facebook unveiled plans for the biggest ever Internet IPO that could raise as much as $10 billion, but made it clear CEO Mark Zuckerberg will exercise almost complete control over the company, leaving investors with little say.The Harvard dropout, who launched the social networking phenomenon from his dorm room, will control 56.9 percent of the voting shares in a company expected to be valued at up to $100 billion when it goes public. Facebook says it has 845 million active monthly users.Wednesday's long-awaited filing kicks off a process that will culminate in Silicon Valley's biggest coming-out party since the heyday of the dotcom boom and bust.In its filing Facebook says it is seeking to raise $5 billion, but that is a figure used to calculate registration fees among others and analysts estimate it could tap investors for $10 billion.That would value the company at $100 billion, dwarfing storied tech giants such as Hewlett Packard Co, while validating the explosive growth worldwide of social media as communication and entertainment.Zuckerberg's economic control of about 28 percent of the shares would be worth $28 billion at a $100 billion valuation, ranking him as the fourth-richest American.The 27-year-old's ownership position means Facebook, a company dissected in 2010's Oscar-winning "The Social Network", will not need to appoint a majority of independent directors or set up board committees to oversee compensation and other matters.The company's ownership structure and bylaws go against shareholder-friendly corporate governance practices put in place in the United States after years of investor activism.As Facebook states in its prospectus, Zuckerberg will "control all matters submitted to stockholders for vote, as well as the overall management and direction of our company."Zuckerberg struck deals with several Facebook investors that granted him voting rights over their shares in all or most situations. Those included Yuri Milner's DST Global, venture capital firm The Founders Fund, and entities affiliated with Technology Crossover Ventures, the IPO filing shows.Google Inc's Sergey Brin and Larry Page retained control of the search giant through similar arrangements and the Sulzbergers did much the same at the New York Times."Zuckerberg, at the time, probably had his choice of investors," said Steven Kaplan, a professor at University of Chicago's Booth School of Business, who researches venture capital and corporate governance. "He basically had the ability to say 'my way or the highway.'""The downside of doing this is that the value of Facebook may be slightly lower than it would be if he were not retaining control."Facebook could make its market debut in the middle of the year based on the usual timetable of IPOs.Its IPO prospectus shows that Facebook generated $3.71 billion in revenue and made $1 billion in net profit last year, up 65 percent from the $606 million it made in 2010."We often talk about inventions like the printing press and the television," Zuckerberg said in a letter accompanying the documents. "Today, our society has reached another tipping point.""The scale of the technology and infrastructure that must be built is unprecedented."Facebook appointed Morgan Stanley, Goldman Sachs and JPMorgan as its lead underwriters. Other bookrunners include Bank of America Merrill Lynch, Barclays Capital and Allen & Co.Zuckerberg agreed to cut his compensation from $1.48 million last year to $1 effective January 1, 2013, following the example of Apple founder Steve Jobs.Facebook's chief operating officer and Zuckerberg's top lieutenant, Sheryl Sandberg, earned $30.8 million in total compensation last year.^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Overview of the company: http://link.reuters.com/rev36sUser growth over the years: http://link.reuters.com/mut36sBankers fees -- how low? http://link.reuters.com/fep36sTop 10 global IPOs: http://link.reuters.com/myn36sThe Zynga factor: http://link.reuters.com/paf65s^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^DOTCOM MANIA?Facebook's growing popularity has pressured entrenched Internet companies from Yahoo to Google Inc. In 2011, the social network overtook Yahoo to become the top provider of online display ads in the United States by revenue, industry research firm eMarketer says.A $10 billion IPO would be the fourth-largest in U.S. history after Visa Inc, General Motors, and AT&T Wireless, Thomson Reuters data shows.The $5 billion figure in Wednesday's prospectus was an initial, reference figure -- a basis for registration fees, among other things -- and could change based on investor demand.The prospectus said 85 percent of Facebook's 2011 revenue was derived from advertising. Social-gaming company Zynga, creator of Farmville, accounted for 12 percent of Facebook's revenue last year.The IPO will dwarf any recent debuts of Internet companies, such as Zynga, LinkedIn Corp, Groupon Inc and Pandora Media Inc.Their IPOs had mixed receptions. The last debut, from Zynga, closed 5 percent below its IPO price during its first trading day in December.Google raised just shy of $2 billion in 2004, while Groupon last year tapped $700 million and Zynga $1 billion.THE HACKER WAYFacebook aims to be more attractive to potential large advertisers. It has improved its ad targeting capabilities as it collects user data through new features such as the Timeline, said George John, founder of Rocket Fuel, a digital marketing company.Advertising revenue increased 69 percent in 2011 from 2010, and its average revenue per ad increased 18 percent."As Facebook gathers more and more users' time and data, it makes sense for advertisers to get more serious about allocating more budget to Facebook," he said.In its prospectus, Facebook revealed an effective 2011 tax rate of 41 percent and warned it could climb in 2012. That rate surpasses the average corporate rate of 35 percent and far outstrips industry peers like Apple, which through offshore businesses pay far less.Yet in his letter to investors, Zuckerberg stressed Facebook's "social mission" over the pursuit of profits."Facebook was not originally founded to be a company," he said. "Simply put: we don't build services to make money; we make money to build better services."He laid out his vision for a company that remained grounded in an engineering culture, devoting several paragraphs of his letter to what he called "The Hacker Way" at Facebook.Some of Facebook's most successful products - including Timeline, chat and video - emerged from "hackathons" where coders gathered to build out prototypes and compare notes, Zuckerberg wrote."Hackers believe that something can always be better, and that nothing is ever complete," he said. "There's a hacker mantra that you'll hear a lot around Facebook offices: 'Code wins arguments.'"(Additional reporting by Alistair Barr, Poornima Gupta and Gerry Shih, Writing by Edwin Chan, Editing by Peter Lauria and Tiffany Wu)======================Privately publicFacebook IPO won't bring major status update01 February 2012 | By Robert Cyran, Rob CoxFacebook’s $5 billion-plus initial public offering won’t bring a major status update. Listing on a stock exchange typically brings lots of changes. But tick through the list, and it’s clear that the social network, which filed for its long-awaited U.S. initial public offering on Wednesday evening, is already largely there. First, consider capital-raising. Facebook, founded in 2004 and led by Mark Zuckerberg, hasn’t had any trouble raising money. It has already collected more than $2 billion from the likes of Silicon Valley venture capitalists, Goldman Sachs and Microsoft. Anyway, it doesn’t need money to build out is business, because it has been cash flow positive since 2009. Facebook’s operations generated $1.5 billion of cash last year, while the company invested less than half that amount. True, the IPO will make it easier for existing investors and employees to cash out – some are selling shares in the offering. But the stock has been trading actively on grey market venues such as SecondMarket for some time. And workers got liquidity from Russian investment fund DST three years ago, when it offered to buy $100 million of stock directly from employees. Going public often has the benefit of raising a company’s profile, and shareholders can become loyal customers and vice versa. But Facebook has 845 million monthly users worldwide and already has been the subject of an Oscar-nominated film. It’s hard to see how ringing the bell on an exchange can make it any better known. Another major adjustment can be transparency. And for sure, Facebook will have to file quarterly financial statements and everything else regulators demand, and these will be publicly available for the first time. But the company already has about 1,200 shareholders and releases financial information to them. Moreover, Zuckerberg meets with employees regularly and fields probing questions about the firm’s finances. So management already knows what it’s like to be scrutinized by investors. It’s not even likely that executives will suddenly have to listen more carefully to outside shareholders. Only a small chunk of Facebook is up for grabs in the IPO, and Zuckerberg will retain majority voting control thanks to the 10 votes attached to each share in the special class he and other insiders will own and all the investors who have ceded voting rights to him. Facebook’s IPO, which could value the company at $100 billion, may be one of the biggest floats in years, but that doesn’t mean it changes much. With one 27-year-old geek remaining very much in charge, it may just turn the most public of private companies into one of the more private public ones.======================DefriendedFacebook IPO lays bare Wall Street's laggards01 February 2012 | By Antony CurrieMorgan Stanley can now officially lord Facebook over its Wall Street rivals. The potentially $100 billion social network’s initial public offering prospectus confirms that arch-rival Goldman Sachs lost the top spot in one of the most widely anticipated stock offerings in a generation. That’s a comedown after it botched an investment round for Facebook, but Goldman still remains on the roster of underwriters, along with JPMorgan, Bank of America Merrill Lynch, Barclays and Allen & Co. The bigger embarrassment is for those who didn’t make the cut. One is Credit Suisse, a Silicon Valley stalwart even after tech banking maestro Frank Quattrone left. Last year, for example, it was one of the lead banks on Groupon’s IPO. Deutsche Bank is also nowhere to be seen, even though it, too, benefited from Quattrone’s services in the 1990s and bought Alex Brown, one of the so-called four horsemen that once dominated tech banking tech and the funding of growth companies. But the big hometown absentee is Citi. The bailed-out megabank has had a harder time hoisting its flag on the West Coast, so expectations it would have nabbed a role in the Facebook deal might have been low. It must nevertheless be a disappointment, especially given the IPO’s links to a couple of the firm’s alumni. Citicorp Venture Capital veterans Arthur Patterson and Jim Swartz co-founded Accel Partners, the firm that turned a nearly $13 million Facebook investment into what could be $9 billion. The Facebook advisers ultimately reflect a certain reality on Wall Street. Credit Suisse, Deutsche Bank and Citi are solidly in the lower half of the U.S. equity league tables. And Citi’s overall equity underwriting revenues of $672 million last year is a third lower than for rivals. There’s still money to be made being in the second tier – and each of them may be added to the lower rung of Facebook’s underwriters later on. But the longer they linger there, the harder it will be to argue they’re part of the bulge-bracket, at least in underwriting stock sales. And without Facebook, networking, whether socially online or in financial circles, will be all the more difficult.===================A sobering look at FacebookFri, Feb 03 17:15 PM ESTBy Sarah McBride and Poornima GuptaSAN FRANCISCO (Reuters) - It's the year's hottest initial public offering, but some wealth managers find themselves having a hard time recommending Facebook to their clients.The world's biggest social network is expected to seek a $75 billion to $100 billion valuation in its IPO, the most anticipated stock offering from Silicon Valley since Google Inc went public in 2004.At Granite Investment Advisors in New Hampshire, Chief Investment Officer Scott Schermerhorn has already been fielding queries from clients eager to get in on the action."We had some clients call and once we step them through the numbers, they sober up," he said. "The valuation is 100 times earnings in a stock market that is trading at 12.""At the end of the day, if you have a small amount of money that you are in a position to lose a chunk of it and you want to speculate on Facebook, go ahead," he added. "But don't use money that you really need to save to do it. I would put it in Microsoft, which is dirt cheap right now."To be sure, most technology analysts would argue that Facebook's growth potential far exceeds that of Microsoft Corp, whose stock has largely traded between $20 and $30 in the past decade. It is taking its first steps toward content streaming for instance, and has yet to make a serious overseas thrust.And a $100 billion valuation for Facebook at the top end - while huge in absolute terms - is not that out of whack in Silicon Valley IPO tradition. Facebook is seeking a multiple of up to 27 times annual revenue, or up to 100 times earnings.Apple Inc - today, the world's most valuable technology corporation - went public at a valuation of just $1.19 billion in 1980, equivalent to 25 times revenue and 102 times earnings. Google - to which Facebook is most often measured against in terms of potential - was valued at $23 billion at the time of its 2004 debut, or 218 times earnings.But the sheer size of Facebook's valuation means that it will have to become the world's first $700 billion company if it is to replicate the gain in Google's stock."At these valuations, investors really need to set aside emotion...and invest with their heads," said Edward Reinhart, managing partner at Capital Advisors Wealth Management, who owns Facebook shares bought on private markets two years ago.Reinhart, who advises clients on retirement planning, warned that hype building up ahead of Facebook's IPO could mean "dangerous waters for the retail investor."INSTITUTIONAL INVESTORS STOCK UPFacebook, led by 27-year-old Mark Zuckerberg, on Wednesday filed its IPO prospectus with the Securities and Exchange Commission, seeking to raise $5 billion.The anticipation surrounding the company and its growth potential recalls the hoopla (Boisterous, jovial commotion or excitement.Extravagant publicity: )that accompanied Apple's, Google's, and Amazon.com Inc's stock debuts. All three companies have done the near-impossible -- lived up to the hype.There are many who believe Facebook will do the same, pointing to its 843 million users and the fact that the company is much bigger and more profitable than other recent Internet debuts, such as the loss-making Pandora Media Inc or Groupon Inc.Social game company Zynga closed up nearly 17 percent on Thursday in the first trading session after Facebook revealed it made 12 percent of its revenue last year from the video game publisher."Facebook has the most potential," said Greenwich, Connecticut-based investment manager Jeff Matthews, speaking about its business plan rather than its stock price. "It's the next Google."While retail investors are still combing through the numbers and doing the math, institutional investors have quietly bought Facebook shares via private pre-IPO exchanges like SharesPost and SecondMarket.About 50 equity funds of the 3,842 tracked by Morningstar disclosed holdings of Facebook stock, led by Morgan Stanley's institutional Opportunity H fund with 3.5 percent of its $242 million portfolio devoted to the social network.Other funds that have disclosed holdings included those managed by Fidelity, T. Rowe Price, ING, Principal and MassMutual.EMOTIONAL CONNECTIONAs with Apple and Google, consumers feel strong emotional connections to Facebook, which could make its stock vulnerable to wild swings if it attracts many retail investors.When the SEC released Facebook's IPO prospectus on Wednesday evening, its website slowed to a crawl as traffic increased 100 times. Facebook also made it into betting books - Irish bookmaker Paddy Power is taking bets on what the share price will be when the social network begins trading.The odds are 7 to 2 so far that investors will be paying between $25 and $34.99 for a share, according to the bookmaker."The challenge is trying to keep individual investor enthusiasm in some sort of line with economic reality," said Lise Buyer, an IPO adviser who worked at Google at the time of its IPO, but hasn't worked on the Facebook IPO.Facebook "has very strong prospects, but all companies have stock prices that at some point must correlate to fundamentals."The social network's 2011 revenue rose 88 percent to $3.71 billion while net profit increased 65 percent to $1 billion in last year. Those are not stellar numbers when compared with Apple's 65 percent growth in revenue to $108.24 billion in fiscal 2011. Apple also outpaced Facebook in terms of income growth, with profit increasing 85 percent to $25.92 billion.Despite this, Apple - with nearly $100 billion in cash and securities - trades at a forward price-to-earnings ratio of 13 times, far lower than the 100 times historic P/E of Facebook's IPO, assuming the $100 billion valuation.Even Microsoft -- which saw net income grow 23 percent to $23.1 billion and revenue rise 12 percent to 69.9 billion for fiscal 2011 -- trades at 11 times future earnings.That's why Schermerhorn, whose firm already owns Apple shares, said he preferred to invest in Microsoft over Facebook. Amazon's shares trade at a relatively dear forward P/E of 131, while Google trades at 19.5."I know it is dominant in its space. Granted, the space is not growing as quickly as Facebook, but I am getting a nice dividend to wait," he said of Microsoft. "I don't have that with Facebook."(Reporting By Sarah McBride and Poornima Gupta, editing by Tiffany Wu, Ed Lane and Carol Bishopric)======================

Google's Schmidt may sell about 2.4 mln shares
Fri, Feb 17 19:16 PM EST

(Corrects paragraph 2 to say Google is based in Mountain View, Calif., not Palo Alto)

Feb 17 (Reuters) - Google Inc chairman Eric Schmidt could sell as many as 2.4 million shares of the company's class A common stock as part of a predetermined stock trading plan.

In a filing with the U.S. regulators, the Mountain View, California -based company said Schmidt adopted the Rule 10b5-1 plan last November and could begin selling shares this month.

Schmidt, who stepped down as Google's chief executive last April after a decade of "adult supervision," could bring down his voting power on the company's stock to about 7.3 percent if he sells all the shares under the plan.

As of Dec. 31, he held 9.1 million shares of Google's Class A and Class B common stock - wielding about 9.7 percent voting power.

If Schmidt sells his shares under the plan, his overall stake would fall to 6.7 million class A and B shares - based on Google's outstanding shares as on Dec. 31 - or about 2.1 percent of outstanding capital stock.

Schmidt, who led Google starting in 2001 to bring more management experience to a then-fledgling company, became executive chairman of the Internet giant's board after stepping down.

Google shares closed at $604.64 on Friday on the Nasdaq. (Reporting by Himank Sharma in Bangalore; Editing by Unnikrishnan Nair)


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Facebook adding banks for IPO: sources
Fri, Mar 02 17:30 PM EST
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By Alistair Barr and Nadia Damouni

SAN FRANCISCO (Reuters) - Facebook Inc will add banks in coming weeks to help underwrite its initial public offering, two sources familiar with its plans said on Friday.

Deutsche Bank, Credit Suisse and Citigroup are among the banks that will likely be added, said the sources, who requested anonymity because they were not authorized to speak publicly on the matter.

Last September, Facebook increased its credit line to $2.5 billion.

One of the sources said that the credit line may be increased to about $5 billion in the future.

In February 2011, Facebook set up a $1.5 billion credit agreement with affiliates of Morgan Stanley, JPMorgan Chase & Co, Goldman Sachs, Bank of America Merrill Lynch and Barclays Capital, the leading underwriters of the company's IPO.

Facebook plans to increase its credit line to help cover a tax bill related to employee stock awards that will vest soon after it goes public.

On February 1, Facebook filed regulatory documents for an IPO.

Bloomberg reported earlier on Friday that Facebook would add banks to its roster of IPO underwriters.

A spokesman for Facebook declined to comment. Representatives for Deutsche Bank, Citigroup and Credit Suisse also declined to comment.

(Reporting By Alistair Barr; Editing by Bernard Orr)
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Face time with Facebook CEO stirs concerns on Wall Street
Wed, Mar 28 07:12 AM EDT
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By Alistair Barr and Alexei Oreskovic

SAN FRANCISCO (Reuters) - Mark Zuckerberg wants at least $5 billion from Wall Street investors, but those investors will not be getting much face time in return.

The Facebook co-founder and CEO made that clear when he skipped the social networking company's first major briefing for analysts and bankers last week. The meeting was the first of many that will take place in the run-up to an IPO that could value the company at close to $100 billion.

Zuckerberg's dismissive approach is hardly unique among elite Silicon Valley companies, but it could become an issue with investors because of the enormous control he exerts over Facebook via special shares.

"We don't think that he should be hiding from the investors," said Carin Zelenko, the director of the capital strategies department for the International Brotherhood of Teamsters, whose pension and benefit funds have more than $100 billion invested in the capital markets.

"He wants investors to put their money behind him, with the confidence in him personally, as the person who built this company and who's going to lead it and control it. He should be accountable to those people who are investing."

According to Zelenko, the Teamsters will send a letter to the trustees of the various Teamster funds advising them to be wary of long-term risks associated with investing in Facebook as a result of its "anti-investor" corporate governance structure.

Two people who attended Facebook's March 19 meeting remarked on the young CEO's absence and privately said they expected at least a cursory appearance. One analyst asked how involved Zuckerberg would be in future. In response, the company said expectations should be set pretty low, according to one of the two who was at the meeting.

"Investors are crazy to want to get in bed with a company where the guy who controls it doesn't even pretend to care about the rest of the shareholders," said Greg Taxin of activist investment firm Spotlight Advisors, who will not buy shares. "That seems like a recipe for disaster."

The company has not yet publicly stated whether Zuckerberg will participate in the pre-IPO investor roadshow or on the quarterly earnings conference calls after the company becomes publicly listed. Facebook declined to comment on Zuckerberg's expected level of involvement with Wall Street.

Zuckerberg is hardly a recluse. He speaks regularly at events to unveil new products and participates in media interviews. But he has been less than impressive in some of his on-stage appearances and his perceived charisma will become more important as he takes on the role of leading one the largest and most high-profile public companies in the world.

Supporters of Zuckerberg point out that the recipient of Time Magazine's 2010 Person of the Year title has become increasingly comfortable in the spotlight, making appearances on television programs such as "The Oprah Winfrey Show" and "60 Minutes."

He is also backed by an experienced management team, including Chief Operating Officer Sheryl Sandberg. A former Google executive, Sandberg has a highly polished public style and is well-versed in financial matters. Many expect her to become Facebook's public face with investors as it enters the public markets.

That is fine with some on Wall Street. "I would always like access to the CEO, but the best use of his time is in running the company," said Dan Niles, chief investment officer at AlphaOne Capital Partners. "I worry more about a CEO who seems to spend too much time talking to Wall Street and the media."

SETTING EXPECTATIONS

As a private company backed by mostly venture capital, Zuckerberg enjoyed great leeway in choosing how to spend his time. But Zuckerberg will control 56.9 percent of post-IPO voting shares thanks to a dual-class stock structure and voting agreements with some early investors, and may face pressure to be more available to investors.

For the moment, with investor enthusiasm for Facebook burning hot, the dual-class structure and Zuckerberg's lack of engagement are not likely to have a big impact on demand for the shares.

But some analysts and governance experts warn that investors may decide they need more face-time with Zuckerberg if the business hits a rough patch.

"The friction will grow between public investors and the company when the company is not able to meet earnings projections or growth projections," said Jim Post, a professor at the Boston University School of Management.

"Investors aren't going to be satisfied until they hear from Zuckerberg."

Companies with dual-class share structures perform worse on average than those with regular stock that give investors equal voting rights, according to studies of corporations from 1994 to 2002 by professors Paul Gompers, Joy Ishii and Andrew Metrick.

"The risk is that a controlling shareholder so believes in his own vision and control that he's going to be unwilling to take input from shareholders, or anyone else, or be much concerned about their well-being," Taxin said.

Some tech companies have special shares and others have CEOs that shun Wall Street. But few combine both like Facebook.

Amazon.com founder and CEO Jeff Bezos and Apple's late Steve Jobs, both of whom had little interest interacting with investors, owned much smaller percentages of their companies and had no special shares. Groupon Inc and Zynga Inc have dual-class share structures that give founders Andrew Mason and Mark Pincus extra voting control. But both of those executives actively participated in pre-IPO road shows and post-IPO earnings calls.

Google may come closest. Special shares give founders Larry Page and Sergey Brin voting power of about 29 percent each, while executive chairman Eric Schmidt has almost 10 percent, according to the company's latest proxy filing.

When Page took over as CEO from Schmidt in 2011, he spoke for a few minutes on his first quarterly earnings conference call before signing off, provoking grumbles from investors.

On the earnings call three months later, Google Chief Financial Officer Patrick Pichette noted that Page would stick around to answer questions.

"I just wanted to make sure that everybody knows he's not going anywhere," Pichette said.

Page has been on every earnings conference call since.

(Editing by Jonathan Weber and Andre Grenon)
---

Reuters
Mergers News
DEALTALK-Avaya IPO faces long wait amid Facebook mania
Thu, Mar 29 14:47 PM EDT

By Nadia Damouni, Nicola Leske and Olivia Oran

NEW YORK, MARCH 29 (Reuters)- Telecom equipment maker Avaya Corp may have to push out its initial public offering to 2013 amid fierce competition for investor attention from hot technology properties like Facebook Inc.

After almost five years of unprofitable private ownership and nine months since it registered for a $1 billion IPO, Avaya, owned by private equity firms Silver Lake and TPG Capital LP, is sensing little appetite among potential investors, four sources familiar with the matter told Reuters.

Such feedback may prompt the company to hold off on the IPO until later this year or 2013, according to the sources, who asked not to be named because the discussions are private.

Avaya, Silver Lake and TPG declined to comment.

An IPO was expected by at least the first quarter of 2012, but the uncertain economic climate and choppy equity markets in the second half of last year scuppered preparations for such a launch.
scup·per1 (skŭp'ər) pronunciation
n.

Nautical. An opening in the side of a ship at deck level to allow water to run off.
An opening for draining off water, as from a floor or the roof of a building
Avaya is now stuck in an IPO backlog that is crowded with technology companies. These are fast-growing social media, software, and mobile platform startups that are a far cry from Avaya's mature telecom equipment business.

"You are seeing a renaissance of venture (capital) and levels of innovation, whether it is in mobility or cloud or security or social. Som e of the companies that have gone public in the last six months have a couple of these elements and have done quite well," said Matthew Schuldt, a tech portfolio manager at Fidelity Investments.

Avaya is a low priority for technology IPO investors who are eagerly awaiting offerings from social networking site Facebook, security software maker Palo Alto Networks, machine data software company Splunk Inc, technology management software maker ServiceNow, human resources software provider Workday Inc and scores of similar companies, according to three of the sources.

Evan Bauman, a co-manager of the Legg Mason ClearBridge Aggressive Growth fund, said, "We're looking for more innovative-type growth with large addressable markets, i.e. flash memory which powers tablets and smartphones. These companies are beneficiaries of the growth of data and ways to access the data, more so than the new cycle of equipment might be for Avaya."

Avaya's IPO is in a "wait-and-see mode" at present, said one of the sources.

Although the company and its private equity owners remain committed to the process, two other sources said that a timeline has not been set due to market conditions.

Silver Lake and TPG originally purchased Avaya for $8.2 billion, but the public value of the company is expected to debut well below that figure, two of the sources said.

In its latest filing with the U.S. Securities and Exchange Commission, Avaya reported total debt of $6.2 billion and cash of $415 million for fiscal 2011. In fiscal 2008 it had debt of $5.2 billion and $594 million in cash.

As a result, Avaya's stockholders' equity deficit was $2.5 billion in 2011.

TECH CRUNCH

Despite the excitement associated with technology IPOs, private equity has not always found it easy to exit investments in the public markets because its companies often have too much debt and too little growth potential compared with newer, venture-capital-backed firms.

Last year chipmaker Freescale Semiconductor Holdings Ltd , which agreed to be bought in 2006 by a consortium that included Blackstone Group LP, Carlyle Group LP, TPG and Permira Advisers LLP, cut its offering to $783 million from more than $1 billion, reflecting weak investor demand.

The private equity firms had purchased Freescale for a hefty $17.6 billion, a nd then advertised it as one of the largest technology IPOs in history.

Similarly, in 2010 Dutch chipmaker NXP Semiconductors NV , one of the first of the large private equity-backed IPOs in the U.S. pipeline after the financial crisis, priced shares 30 percent below the expected range. NXP filed for an IPO worth up to $1.15 billion but ended up raising $476 million.

The marketing of NXP's IPO also encountered a setback when Deutsche Bank AG lost its underwriting slot because it refused to renew a $60 million line of credit for the chipmaker.

"If the economy is doing pretty well, or certainly better, it might also be the time to cut your losses if you are on the private equity side," Fidelity's Schuldt said.

"You may not make your money back or maybe it will be a long time if you ever do. It might be time to move your focus from past deals to investing in new assets since that is likely to generate higher returns."

COMPETITIVE STREAK

Avaya has paid top dollar for several acquisitions so it could remain competitive in the telecom equipment and networking sectors.

It counts Cisco Systems Inc, Microsoft Corp , Brocade Communications Systems Inc, NEC Corp , Huawei Technology Co and Siemens Enterprise Communications Group among its competitors.

In March, New Jersey-based Avaya signed a deal to buy Israeli video conferencing company Radvision for $230 million .

In 2009, Avaya paid $900 million during a competitive auction process for a unit of bankrupt Nortel Networks Corp that builds corporate networks.

One of the sources said that Avaya had bought the Nortel assets to get some synergies and create additional value. "That has created some uplift and value," the source said.

Avaya also has a recognized brand name with thousands of patents and solid cash flow, unlike some fast-growing technology startups.

Its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $971 million in the fiscal year ending Sept. 30, 2011, up from $795 million in 2010.

"Some of these cloud companies will go out and they are small and they will get great valuations," said one technology investor who asked not to be named.

"Avaya is a real company generating good money," the investor said. "Whether they get great valuation, I don't know."

====

Facebook to buy Instagram for $1 billion
Tue, Apr 10 09:13 AM EDT
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By Alexei Oreskovic and Gerry Shih

SAN FRANCISCO (Reuters) - Facebook will pay $1 billion in cash and stock for Instagram, a 2-year-old photo-sharing application developer, in its largest-ever acquisition just months before the No. 1 social media website is expected to go public.

The price was stunning for an apps-maker without any significant revenue, even when measured by the lofty standards of Silicon Valley, where startup valuations have soared in recent years. It highlights the rising stakes in the social networking market in which services such as Facebook need to constantly excite consumers with new features and mobile applications.

By acquiring Instagram - in a deal announced days after the startup closed a funding round that valued it at $500 million - Facebook may also have sought to absorb a potential rival or at least prevent it from falling into the hands of a major competitor like Twitter or Google Inc.

"Anytime you see a social platform that's growing that quickly, that's got to be cause to be nervous," said Paul Buchheit, a partner at the start-up incubator program Y Combinator and a co-founder of FriendFeed, which Facebook acquired in 2009.

"It would be better to have bought Twitter at this stage," he said of Facebook. "So if you're thinking this could be the next Twitter, it could be a smart thing to do."

The Instagram application, which allows users to add filters and effects to pictures taken on their iPhone and Android devices and to share those photos with their friends, has gained about 30 million users since it launched in January 2011.

Instagram says that as of the end of 2011, its users had uploaded some 400 million photos or about 60 pix per second, suggesting the sort of activity that Facebook seeks as it tries to wring revenue from mobile devices. Instagram launched its Android app just last week, garnering more than one million downloads already.

As Instagram's popularity has shot up in recent months, the company's leadership has mulled possible strategies to expand the service into a fully featured social network - much like a photo-driven, stripped-down version of Facebook, Twitter, or even Path, a company insider said.

Instagram is "a property that would have been amazingly valuable to not just Facebook, certainly Twitter was in the hunt as well," said Lou Kerner, founder of the Social Internet Fund.

"I'm sure Google was interested as well. So to some degree an acquisition like this is both offensive and defensive. It would be a highly leveragable asset for anybody who wanted to compete against Facebook."

Instagram, with roughly a dozen employees based in San Francisco, closed a $50 million funding round last week from investors including Sequoia Capital and Greylock Partners, according to a source familiar with the matter. The funding valued the company, founded in early 2010, at $500 million, it said.

Facebook, which is expected to raise $5 billion via the largest Silicon Valley initial public offering by May, will acquire Instagram's entire team.

"This is an important milestone for Facebook because it's the first time we've ever acquired a product and company with so many users," Facebook Chief Executive Mark Zuckerberg said in a blog post. "We don't plan on doing many more of these, if any at all."

The deal, a closely kept secret at the tiny start-up, is expected to close this quarter. CEO Kevin Systrom announced the transaction to Instagram employees at a 9 a.m. meeting on Monday, according to the source inside Instagram.

TAKING PAGE FROM GOOGLE'S BOOK

The acquisition marks an exception in strategy for Facebook, which has traditionally bought small companies as a means of hiring coveted teams of engineers. Facebook typically discontinues the acquired company's products or builds similar versions that it integrates into its service.

Instagram, however, will not only remain running, but Facebook will build features into it as time goes by, both companies said.

Tech industry insiders were quick to draw parallels with Google's $1.65 billion acquisition of video service YouTube in 2006. YouTube retains its own offices in San Bruno, California, and largely operates independently of Google.

"Facebook is acquiring a similar company in that it's fast growing, doesn't have revenue or a business model, but has become part of the online culture," said Gartner analyst Ray Valdes.

"I would wager that almost everyone is also a Facebook user, so it's not like they're expanding their market," Valdes said of Facebook. "What they're buying is traction, they're buying engagement, they're buying brand value."

Facebook, the world's No. 1 social network with more than 845 million users, is facing increasing competition. Last year, search giant Google launched Google+, a rival service that offers many of the features available on Facebook.

With its purchase, Facebook said it would continue to develop Instagram as an independent app that remains compatible with other social networking services.

"We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook," Zuckerberg wrote.

EXPENSIVE HABIT

Instagram is backed by a number of Web industry bigwigs with ties to Facebook, including Benchmark Capital and Andreessen Horowitz. Benchmark partner Matt Cohler led a $7 million funding round in Instagram in 2011 and serves on Instagram's board. Cohler was also an early employee of Facebook, who still serves as a "special advisor" to Facebook, according to his profile on LinkedIn.

Facebook generated $3.7 billion in revenue in 2011, and ended the year with $3.9 billion in cash and marketable securities on its balance sheet, according to its prospectus.

While it was not immediately clear what portion of the Instagram acquisition price Facebook paid in cash, the price represents an "extraordinary" valuation, said Paul Deninger, senior managing director of investment banking firm Evercore Partners.

"There are no obvious traditional valuation metrics that justify this price," he said, though he noted that that did not mean that it would be a bad deal for Facebook.

Some tech industry observers noted that deal may dramatically ramp up the valuations on other fast-growing social media companies and app-makers - such as Pinterest - as entrenched Web players seek to snap up attractive assets and bolster their social capabilities to challenge Facebook.

"It will be interesting because if Facebook has to keep buying up the hot new social network, that could get expensive after a while," said Y Combinator's Buchheit.

(Reporting by Alexei Oreskovic and Gerry Shih; Editing by Edwin Chan, Lisa Von Ahn and Richard Chang)

=======

Facebook reveals revenue, profit slide ahead of IPO
Mon, Apr 23 19:40 PM EDT
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By Alexei Oreskovic and Alistair Barr

SAN FRANCISCO (Reuters) - Facebook Inc reported its first quarter-to-quarter revenue slide in at least two years, a sign that the social network's sizzling growth may be cooling as it prepares to go public in the biggest ever Internet IPO.

The company blamed the first-quarter decline, which surprised some on Wall Street, on seasonal advertising trends.

"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 preparing to raise at least $5 billion in an initial public offering that could value the world's largest social network at up to $100 billion.

"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."
"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."

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 over the long term, he added.



The company, founded by Mark Zuckerberg in a Harvard University dorm room in 2004, surpassed 900 million monthly active users in the first quarter and said its full-time staff grew by about 1,100 employees to 3,539 in the past 12 months, according to an updated filing with the U.S. Securities and Exchange Commission on Monday.

Facebook also disclosed that it has agreed to pay Instagram $200 million if the company's recent deal to buy the photo-sharing start-up for about $1 billion does not go through.

Facebook said it paid $300 million in cash for Instagram, along with 23 million shares of Class B common stock. It said the fair value of its Class B common stock was $30.89 per share as of January 31.

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

Net income slid 12 percent to $205 million in the quarter, from $233 million a year earlier at the rapidly expanding company.

Facebook said its advertising business, which accounts for the bulk of its revenue, typically slows down in the first three months of the year. The rapid advertising growth may have "partially masked" such trends to date, and seasonal impacts may be more pronounced in the future, it noted.

Revenue, which totaled $1.06 billion in the three months ended March 31, declined 6 percent from the fourth quarter. It was the first quarter-on-quarter drop since at least 2010.

"It was bound to happen. You are going to see a slowdown," said Anupam Palit, an analyst at GreenCrest Capital LLC, noting that it is harder to double revenue when the base is larger.

But he also said Facebook has not worked out how to make more money in some international markets where it is growing the fastest, such as Brazil, India and the Philippines.

"They have not cracked international markets yet, while others like Google do very well internationally," Palit added.

Apart from slowing growth, Facebook is also grappling with other issues. Yahoo Inc is suing it for patent infringement even as the social networking company tries to beef up its intellectual property arsenal. On Monday, it said it would pay $550 million for hundreds of patents from Microsoft Corp.

PAYMENTS HINT

Facebook gets most of its revenue from advertising, but has a Payments business centered around Facebook Credits, a virtual currency used mainly to buy virtual goods within social games.

However, the company hinted at a possible an expansion of Facebook Credits into other areas.

Facebook gets a cut of up to 30 percent from virtual goods sales on its platform.

"In the future, if we extend Payments outside of games, the percentage fee we receive from developers may vary," the company said in its IPO filing on Monday.

Some investors expect e-commerce to be a major area of expansion for Facebook. Some industry experts said that if Facebook Credits were used for purchases of physical goods, the company's cut would have to be a lot lower than 30 percent.

(Reporting By Alistair Barr and Alexei Oreskovic; Editing by Gary Hill and Richard Chang)
=========

Facebook execs hit the road to persuade investors

Technology May. 07, 2012 - 06:40AM JST ( 1 )
Facebook execs hit the road to persuade investors Facebook exects hit the road to persuade investors AFP

NEW YORK —

Facebook, already assured of becoming one of the most valuable U.S. firms when it goes public later this month, now must convince investors in the next two weeks that it is worth all the hype.

Top executives at the world’s leading social network have kicked off their all-important road show on Wall Street—an intense marketing drive ahead of the company’s expected trading launch on the tech-heavy Nasdaq on May 18.

For small investors, the California firm has produced a slick half-hour video set to music that explains the mission, products, finances and future of the company, with chief executive Mark Zuckerberg doing the narration himself.

At JP Morgan Chase, one of the banks with a lead role in Facebook’s initial public offering, the scene was flashy, with large Facebook-blue flags draped outside the New York headquarters to welcome the company’s executives.

In a filing with the US Securities and Exchange Commission on Thursday, Facebook set a price range of $28 to $35 for its shares, which would value the firm at between $70 billion and $87.5 billion.

Based on the estimated market value, Facebook would rank behind Amazon and Cisco, each worth over $100 billion, but ahead of Hewlett-Packard ($48 billion) and struggling Yahoo! ($19 billion).

If all stock options that could be exercised in the next one to two years are taken into account, the value would rise to between $91 billion and $97 billion—or up to 26 times the turnover Facebook posted in 2011.

When Google went public in 2004, its valuation was $23 billion, and now it has a market value of $200 billion—only five times its turnover.

Some are offended by the price set for Facebook, a site founded by Zuckerberg just eight years ago from his Harvard dorm room. Still only 27, he will retain 57.3% of the voting power of the shares.

Others expected better—some analysts predicted a price of $44 a share in the short term, and a much higher figure in the long term.

At the heart of the debate about Facebook’s true value is how much revenue it takes in.

Revenue vaulted to $1.06 billion in the quarter ended March 31—an improvement year-over-year, but down about six percent from the previous quarter. Eighty-five percent of the total came from ad sales.

As one analyst noted, however, Facebook only bills about five percent of the $600 billion spent each year on online advertising—even though at least one of every seven minutes spent online around the world is spent on Facebook.

Such figures mean there is a wide margin for improvement, seeing as the social network has more than 900 million users and is constantly expanding its membership.

The company must strike a delicate balance between the need to make money, the need to limit the use of tools that track user behavior so as to sharpen ad efficiency, and the need to keep the site from reaching its saturation point.

“Facebook could in the short term double its revenues by cramming more ads onto the page, but that would be a very short-term strategy—two years later, you’d have users walking away,” Emily Pereira, a spokeswoman for social media marketing firm Wildfire, told AFP.

But other analysts say they hope that once Facebook is listed, it will heed investors’ wishes and focus more on the company’s bottom line—and making money more quickly.

Some like Jeff Corbin, head of the financial communications group KCSA, say Facebook must transcend the media hype and answer some tough questions before the IPO.

“What is the plan to diversify the company’s revenue?” Corbin asked.

“Is Mr Zuckerberg trying to have his cake and eat it too? Reap the benefits of being a public company and, at the same time, maintain the benefits of controlling a private company?”

===============
Top tech investor and TV Dragon Julie Meyer analyses the upcoming Facebook flotation and gives it to you straight. Should you be in or out?

Fine artist and commercial illustrator - City of Toronto Artists ... == Facebook shares first time below $20 Thu, Aug 02 15:52 PM EDT By Alexei Oreskovic SAN FRANCISCO (Reuters) - Shares of Facebook Inc dipped below $20 for the first time on Thursday, pummeled by ongoing doubts about its growth prospects, a string of recent executive departures, and the August 16 expiration of a lockup period on insiders' share sales. The stock hit a low of $19.82 in heavy trading on Thursday afternoon. It has now lost almost half its value since debuting at $38 in May in the largest IPO ever to emerge from Silicon Valley. "The sentiment on this thing is so negative," said Topeka Capital Markets analyst Victor Anthony. "I think this thing may continue to tick down until you see some sort of meaningful catalyst which unfortunately may not show until third-quarter earnings." On Wednesday, Facebook's director of platform partnerships, Ethan Beard, and the director of strategic partnership marketing, Katie Mitic, each separately announced plans to leave the company. They represent the latest of several departures - including that of Facebook's chief technology officer in June - since the IPO. Facebook's first tier of lock-up restrictions go away on August 16, when about 271 million shares will be available for trading, with another 243 million shares set to become available for trading between mid-October and mid-November. But the day most investors are bracing for is November 14, when more than 1.2 billion shares will suddenly be available for trading. The imminent lock-up expiration also means that Wall Street analysts who participated in the Facebook IPO will once again go quiet, for a 30-day period, potentially creating more uncertainty in a stock that has experienced one of the rockiest market debuts in memory. Of the 36 Wall Street analysts covering Facebook, 20 belong to firms that were involved in the IPO. The first American company to debut with a market valuation of more than $100 billion, Facebook has fallen out of favor on Wall Street as investors fret about its slowing revenue growth. In the second quarter, Facebook reported revenue growth of 32 percent, compared with the more than 100 percent growth it delivered at the same time last year. Facebook shares were down 4.6 percent at $19.91 on Thursday afternoon, off the earlier low at $19.82. (This story changes Karen Mitic's title following correction by company) (Reporting by Alexei Oreskovic; Editing by Maureen Bavdek, Tim Dobbyn and Matthew Lewis) ============