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Wednesday, 03 September 2014

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Facebook mobilizes back to square one

Facebook has at last mobilized back to square one. Its shares finally broke back above the $38 price set in the company’s messy initial public offering 14 months ago. That’s largely thanks to Chief Executive Mark Zuckerberg making the social network’s platform work on smartphones and tablets even as his tech rivals mostly flounder at the task.

In recent months, mobile computing has proved a challenge for the likes of Microsoft and even Google. Facebook, by contrast, seems to be getting it right. The company’s revenue growth rate of 53 percent in the second quarter from a year earlier was the fastest since its market debut. Mobile advertising also now accounts for more than 40 percent of the company’s ad revenue, essentially from a standing start a year ago.

The recent pop in its stock means Facebook has easily outperformed Microsoft, Google, Apple and the tech-heavy Nasdaq market as a whole over any period from a month to a year. In 2013, for instance, its stock is up more than 40 percent, and the company’s market value is again approaching $100 billion. The Nasdaq is up only around 20 percent over the same period.

If Zuckerberg can keep it up, Facebook shareholders will eventually have much to like. It’s early days, though. Anyone who bought the stock at the IPO price set on May 17 last year has only now been made whole again. That falls short even of Microsoft’s single-digit percentage gain. The Nasdaq market is up more than 20 percent, and Google more than 40 percent.

There’s another company that has outperformed them all: LinkedIn. The smaller, more specialized and perhaps stickier social network is worth barely a fifth of Facebook’s market value. The company founded by Reid Hoffman went public a year earlier at $45 a share and doubled on the day. The shares have essentially doubled again to trade above $200 apiece. Zuckerberg will need to show the kind of mettle exhibited by his smaller rival before he deserves a full-fledged thumbs-up from investors.

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Facebook’s initial public offering priced at $38 a share on May 17, 2012. The stock closed slightly higher on May 18, the first trading day, but then fell sharply and has traded well below the IPO price until recently. On July 31, Facebook shares rose above $38 after opening at $37.98.

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