Coverage of the appearance of Facebook Inc. (NASDAQ: FB) CEO Mark Zuckerberg at a conference run by tech news site TechCrunch was widespread. Zuckerberg said he was disappointed by the performance of Facebook stock and that his company has plans to make itself into the corporation that Wall St. once valued at $100 billion. There is no reason to believe he has such plans, at least insofar as Facebook actually can deliver on its version of a turnaround.
Of course, Zuckerberg is disappointed with the Facebook share price, which has dropped from an IPO level of $38 to less than $20. The press and financial experts claim that makes it one of the most botched big initial public offerings of all time. Even if the effect on his own wealth is set aside, the pressure on the company to recoup investor losses must be crushing. That happens when $40 billion of market capitalization disappears in just a few months. Imagine the numerous emails and calls Facebook must get every day from investors.
Zuckerberg made two additional important points. The first was the company would not make its own smartphone. To do so would be suicide, with the dominant market share held by Samsung and Apple Inc. (NASDAQ: AAPL), and the potential to get ensnared in the patent suits that have roiled the industry.
Zuckerberg’s second point was that the market has underestimated Facebook’s earnings power as its members move their activity to smartphones and tablets. Investors and analysts have been extremely disappointed by the lack of progress by the social network company in this field, given the growing size of the mobile market and the fact that Facebook has done so little to find revenue in the sector. Facebook joins companies as diverse as Google Inc. (NASDAQ: GOOG), Microsoft Corp. (NASDAQ: MSFT) and several retailers like Wal-Mart Stores Inc. (NYSE: WMT) that have attempted, with little success, to benefit from the proliferation of smartphones and the astonishing time that people spend using them.
One of Zuckerberg’s closing comments was that “Ten, 20 years from now, the legacy of this company should be, we have connected everyone in the world. That’s a lot.” It is a lot, but only if Facebook can make money on the process. In the meantime, Zuckerberg sounds like any other CEO of a troubled company defending his business model and making a case for future success.
Douglas A. McIntyre
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