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Biz Break: Facebook's mobile momentum grows as sales top $3 billion [San Jose Mercury News](San Jose Mercury News (CA) Via Acquire Media NewsEdge) Oct. 28--Today: Facebook again exceeds expectations with strong revenue growth as the social network finds gains on mobile, but shares drop on a forecast that doubts the massive growth will continue at the same rate. Also: Gilead, EA also decline after earnings reports. The Lead: Facebook sales, mobile growth continues at fast pace Facebook is valued at more than $200 billion, but the social network can still surprise Wall Street with its rapidly ballooning sales. The Menlo Park company exceeded analysts' revenue forecasts for the tenth consecutive quarter in Tuesday's report, which detailed profits of $806 million, or 30 cents a share, on sales of $3.2 billion, the first time Facebook has topped $3 billion in revenues in a single three-month period. Analysts had expected Facebook to report third-quarter revenues of $3.12 billion, according to a Thomson Reuters survey, and Facebook also topped adjusted-profit projections. "These results show that Facebook is getting stronger every day," founder and CEO Mark Zuckerberg said in a conference call Tuesday. Facebook's mobile efforts continued to bloom: After admitting to going public in 2012 without a plan to monetize mobile, nearly two-thirds of Facebook's advertising revenues came from mobile ads, up from just shy of half at this time last year. The need to score big mobile revenues is key for Facebook, which said more than a third of its 1.35 billion active users access the site only through mobile devices. "We expect this shift and strength in mobile to continue," Stern Agee analyst Arvid Bhatia wrote in a note ahead of the earnings report, in which he correctly predicted Facebook's 66 percent mobile-revenues ratio. "We believe over the next two years, mobile advertising revenue could represent about 80 percent of total advertising revenue for Facebook." Facebook has spent heavily in an attempt to boost its mobile revenues even more, with the $1 billion acquisition of Instagram and the $16 billion purchase of WhatsApp, which closed during the third quarter. Facebook also split its own messaging app, Facebook Messenger, from its core mobile app, forcing users to transition over to the stand-alone app. Those offerings are not generating revenue yet, though Zuckerberg said that Instagram users are spending a healthy 21 minutes a day in the app and Facebook Messenger users are responding to messages 20 percent faster in the stand-alone app. In a first peek at financial performance from the WhatsApp messaging app, Facebook disclosed in a federal filing that the Mountain View company generated only $10.2 million in 2013 revenues while spending $148.7 million. Facebook insists that it will take its time generating revenue with its new toys, which also includes the $2 billion Oculus virtual-reality firm. Facebook predicted a stark slowdown in revenue growth this quarter, predicting no more than 47 percent year-over-year increase in the current quarter after growth totaled 59 percent in the third quarter. Chief Financial Officer David Wehner also disclosed that expenses would shoot higher in 2015 thanks to a larger workforce and higher stock-compensation costs. Facebook shares seemed to be affected by predictions of slower growth and higher costs: After reaching a record closing high of $80.77 Tuesday with a 0.6 percent daily gain, shares dropped to less than $75 in after-hours action. SV150 market report: Electronic Arts rises, Gilead falls after earnings Stocks enjoyed strong gains overall Tuesday as investors reacted positively to the most recent batch of earnings, sending the Dow Jones industrial average higher than 17,000, but Electronic Arts and Gilead joined Facebook in after-hours declines. Gilead Sciences joined Facebook in a late decline after the company reported a slump in sales of its hepatitis C drug Sovaldi. After collecting $3.48 billion in Sovaldi sales in the second quarter, Gilead's sales of the breakthrough drug dropped to $2.8 billion, missing estimates and sending the Foster City company's stock down about 4 percent after it reached a record high of more than $104 in regular trading. Electronic Arts also fell despite handily defeating Wall Street's earnings expectations. The Redwood City video game publisher reported net income of $3 million, or a penny a share, on sales of $990 million, and raised its forecasts for the full fiscal year. Still, EA shares dipped to near $36 after closing with a 1.7 percent gain at $37.48. The steepest drop belonged to San Jose components manufacturer InvenSense, which handily missed projections and plummeted more than 25 percent in late trading after closing with a 6.8 percent gain at $21.48. The results from Monday's earnings reports were more varied, with one big loser: Twitter. The San Francisco social-networking company suffered after reporting falling user growth Monday afternoon, experiencing the largest percentage decline in the SV150 with a 9.8 percent drop to $43.78 as analysts doubted the service's long-term prospects. Sanmina and Integrated Device Technology rode their earnings reports to the other side of the extreme, leading the SV150 with gains of 26.6 percent and 18.4 percent, respectively. A couple spots lower on the winners list was Tesla Motors, which roared 9.5 percent higher to $242.77 after CEO Elon Musk took to Twitter to defend his company's sales from a report that claimed a drop in demand. Apple rose to record highs once again, gaining 1.6 percent to $106.74 as CEO Tim Cook praised early returns for its mobile payments offering and considered a tie-up with Alibaba, and Google added 1.7 percent to $558.94 while pondering a YouTube subscription service. GoPro jumped 6.8 percent to $69.30 on analyst optimism ahead of its first earnings report as a public company, and Milpitas security company FireEye added 8.7 percent to $33.64 after detailing Russian involvement in hacking attacks. Up: Tesla, GoPro, Juniper, Workday, Salesforce, SolarCity, Yelp, LinkedIn, Yahoo Down: Twitter, LeapFrog, Medivation The SV150 index of Silicon Valley's largest tech companies: Up 21.86, or 1.37 percent, to 1,620.49 The tech-heavy Nasdaq composite index: Up 78.36, or 1.75 percent, to 4,564.29 The blue chip Dow Jones industrial average: Up 187.81, or 1.12 percent, to 17,005.75 And the widely watched Standard & Poor's 500 index: Up 23.42, or 1.19 percent, to 1,985.05 –––– Sign up for the 60-Second Business Break newsletter at www.siliconvalley.com. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510. ___ (c)2014 San Jose Mercury News (San Jose, Calif.) Visit the San Jose Mercury News (San Jose, Calif.) at www.mercurynews.com Distributed by MCT Information Services |