MOUNTAIN VIEW, Calif. (KTVU) - Facebook stock got hammered all day long today, losing 19 percent off its value, an event which personally cost founder Mark Zuckerberg $15 billion of his personal wealth. Facebook's stock got torpedoed the second the stock market had a chance to react to bad financial news. We spoke to two people who've been following high tech before it was even an industry. They weighed in on today's rout.
Attorney Terry Connelly, a Former Wall Street Banker and retired Dean of Golden Gate University's Business School, says it was way overdone. The market is having an episode of Facebook Derangement Syndrome," said Dean Connelly. What investors them boils down to two words: expenses versus income.
On the expense side, the need to hire thousands of people to better protect user privacy and to bolster its own image. "Facebook always takes a hit in its stock price when it reveals that it's investing seriously in its business in terms of its best interest going forward," said Connelly. Larry Magid is the dean of Bay Area tech analysts. "Facebook is having to pay more, first, to shore up its systems. It's also paying for national advertising to try to convince us that they're making that change,: said Mr. Magid.
On the income side, Facebook's growth raises another red flag. "It's growth is slowing down and, of course, its income is possibly going to slow down and their expenses have gone up. so they're worried about a revenue hit,," said Magid. Magid says that many observers worry that too many users are spending way too much time on Facebook to the detriment of their personal lives, careers and families. And so, many are reassessing their own use as well as tiring of all the online rancor, rudeness and politicization of the platform.
But there's more to Facebook than Facebook. "The company still is profitable, it is still growing ever so slightly, and it still has the secret sauce in What's App and Instagram which are successful products that are Attracting people globally and also attracting young people," said Magid.
Dean Connelly says, at this new low price, he expects cooler heads will be looking for a bargain. "Takea second look at this $120 billion loss and see if there isn't some money to be made there," said Connelly.
For perspective, other mega companies that suffered mega losses included Apple, Microsoft, Intel and Google. Others, AOL and MySpace are shadows of their once dominant selves. Yet others, Alta Vista, Netscape, Napster and Pets.com are long gone.