Facebook Looking to Hire Thousands

By Kurt Wagner

Facebook is baring its business soul — and the outcome could pay off for Santa Clara graduates looking to land a job with the world's largest social-networking site. 

The unveiling came Feb. 1 when the Menlo Park-based company that depends on people sharing their lives online filed its plans to raise $5 billion in an initial public offering of stock. It's a revelatory moment that prospective investors, curious competitors and nosy reporters have been awaiting for two years. During that time, Facebook established itself as a communications hub and emerged as a threat to the Internet's most powerful company, Google Inc.

Above all, the documents confirmed what everyone had been hearing: Facebook is very profitable and growing stronger. The company Mark Zuckerberg started with some friends in 2004 has seen its annual revenue soar from $777 million in 2009 to $3.7 billion last year. Facebook's earnings have grown at a similar rate too, ballooning from $122 million in 2009 to $668 million last year.

Facebook ended 2011 with $3.9 billion in cash. That's a relatively small amount compared to the nearly $45 billion that Google has in the bank.

Reports from early December confirm that Facebook is looking to hire "thousands" of employees as well as open an office in New York City. For college students, including recent and soon-to-be Santa Clara graduates, Facebook could become a real possibility for interested applicants. According to the Facebook website, there are 232 job openings in the Menlo Park branch alone. 

Facebook's prosperity has been fueled by a steady expansion of its audience, making its website a more attractive marketing vehicle for ads, which account for most of the company's revenue. Facebook ended last year with 845 million users, up 39 percent from 608 million at the end of 2010. 

Facebook has become so addictive that more than half its audience — 483 million users — log in every day.

Facebook's revenue total disappointed some people who pored through the documents. One reason: The company generates about $4.39 in revenue per user. "That is a surprisingly low number," said University of Notre Dame Finance Professor Tim Loughran, who studies IPOs, or Initial Public Offerings. Google's annual revenue of nearly $38 billion works out to more than $30 per user of its services.

"Facebook needs to find more ways to get revenue from their users," Loughran said.

Facebook listed its most promising expansion opportunities as Brazil, Germany, India, Japan, Russia and South Korea. The company eventually hopes to make its service available in China if it can navigate rules requiring censorship of online content considered objectionable or obscene by the Chinese government.

The IPO filing gives some clue when Facebook is likely to surpass 1 billion users. If it can add users at roughly the same pace as last year, Facebook should surpass the 1 billion mark this summer.

It is still too early in the process for Facebook to reveal how much it intends to ask for its shares, but Facebook valued its Class B common stock at $29.73 at the end of December, down slightly from appraisals of $30.07 in June and September. If this unfolds like most hot IPOs, Facebook will probably try to sell its shares at a premium. That could mean an IPO price in the $35 to $40 range.

Facebook still hasn't listed how many outstanding shares it has, but the documents make it possible to make a rough estimate of the company's market value at the end of last year. Financial notes in the filing show Facebook calculated it had about 2.9 billion fully diluted shares at the end of December. That works out to a market value of about $86 billion, based on Facebook's $29.73-per-share self-appraisal.

At that price, the nearly 534 million shares that the 27-year-old Zuckerberg owns are worth about $16 billion. The filing indicates Zuckerberg will sell an unspecified number of shares in the IPO to cover a tax bill for exercising a stock option to buy 120 million shares. Zuckerberg's option price was $0.06 per share, reported Time Magazine.

Zuckerberg has been collecting a $500,000 salary but that will fall to one dollar next year at his own request, according to the filing.

Contact Kurt Wagner at jwagner@scu.edu or call (408) 554-4849. Michael Liedtke of the Associated Press contributed to this report.