Facebook warns of increased spending, shares fall

Tue Oct 28, 2014 7:53pm EDT
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By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Facebook Inc warned on Tuesday of a dramatic increase in spending in 2015 and projected a slowdown in revenue growth this quarter, slicing a tenth off its market value.

The hefty spending plans exposed the first signs of stress in the rock-solid support that investors have accorded the social networking company over the past year.

With Facebook's mobile advertising business delivering repeated quarters of breakneck revenue growth, the company has faced little pushback from investors on pricey, multi-billion dollar acquisitions such as WhatsApp and Oculus. Shares of Facebook reached an all-time high of $81.16 on Tuesday, before the company reported its third-quarter results.

Chief Financial Officer Dave Wehner told analysts on a conference call that the social network is preparing for a 55 percent to 75 percent spike in expenses next year, when the world's largest social network intends to invest in Whatsapp, Oculus and other products that have yet to show a profit.

That's a big change from the company's current spending patterns, with costs and expenses in the first nine months of 2013 up a relatively modest 32 percent. Facebook declined to provide any estimates for its expected pace of revenue growth in 2015, adding to investor worries.

"Giving expense guidance without giving revenue guidance is frustrating and spooking The Street," said BTIG analyst Richard Greenfield.

"The multi-billion dollar question is what’s revenue growth going to look like next year," he said.

Wehner forecast revenue growth of 40 percent to 47 percent in the final quarter of 2014. That's down sharply from 59 percent in the third quarter.   Continued...

The sun rises behind the entrance sign to Facebook headquarters in Menlo Park before the company's IPO launch, May 18, 2012.  REUTERS/Beck Diefenbach