Facebook begins to show its cracks

Facebook Inc’s first set of quarterly numbers failed to assuage investors worried that the world’s No. 1 social network will have a tough time reversing a gradual deceleration in revenue growth. Its shares sank 11 percent to a record low.

Facebook reported revenue increased 32 percent in the second quarter, in line with average forecasts. The company did not offer an outlook for the third quarter as some investors had hoped.

Monthly active users grew to 955 million, up from 901 million at the end of March.

But shares of Facebook, which went public in a rocky initial public offering in May, dropped to a new low of $23.94 in after-hours trading.

“They beat, but the Street was looking for more and that’s why I think shares turned lower after an initial bounce,” said Michael Matousek, a senior trader at U.S. Global Investors Inc, which manages about $3 billion.

“The big question with the stock is how it will monetize its billion or so users. A lot of people think they can’t convert those users to money.

Facebook posted a net loss of $157 million, or 8 cents a share in the second quarter, due to hefty stock compensation charges related to its IPO, compared to net income of $240 million, or 11 cents, in the year-ago quarter.

Excluding the charges, Facebook said it earned 12 cents a share.

In its first report to Wall Street since the IPO, the world’s No.1 social networking company said that revenue in the three months ended June 30 was $1.18 billion, compared to $895 million in the year-ago quarter.

The eight-year-old company, started by Mark Zuckerberg in his Harvard dormitory room, became the first American company to debut at over $100 billion in value when it went public on May 18. But shares of Facebook are now down about 37 percent from its $38 offering price, as investors worry about the company’s ability to transform its growing mobile presence into ad revenue and the company’s long-term money-making potential.

The stock dived to $23.94 in extended trade, from a close of $26.85 on the Nasdaq.

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Facebook begins to show its cracks