R&D Expenses, if well directed, can open new avenues to drive revenue in the near future, if not, it can prove to be very costly. This is something we will have to keep an eye on and see if management can produce some positive results on this massive increase in R&D Expenses.
Like R&D, Marketing and Sales can produce positive results, and are vital in a very competitive markets like this one. G&A is the one that worries me the most, we must hope that management has not added people to their payroll just to expand their “kingdom.” I know Facebook Inc (NASDAQ:FB) is still growing, but in my book, this is a very rapid increase in administrative expenses.
What about the big dog?
We now know what Facebook Inc (NASDAQ:FB) has done over the most recent quarter, as well as their last three full years. This is just comparing Facebook to itself, what might we learn if we compare what we know to the big dog on the block? I am of course referring to Google Inc (NASDAQ:GOOG). Take a look at their last three years:
| 2010 | 2011 | 2012 | |
| Cost of Revenue Google/Advertising | $17.76 | $17.40 | $17.11 |
| Cost of Revenue Motorola Mobile | $0.00 | $0.00 | $3.45 |
| Research and Development | $6.42 | $6.81 | $6.77 |
| Sales and Marketing | $4.77 | $6.05 | $6.12 |
| General and Administrative | $3.35 | $3.59 | $3.82 |
| Income Tax | $3.91 | $3.42 | $2.59 |
| Net Income | $14.50 | $12.84 | $10.70 |
Google Inc (NASDAQ:GOOG) has been experiencing a three-year decline in Net Income, but is still dropping 21.399% of their revenue down to their bottom line. This is even more impressive when you realize how large Google has become. This dog can still bark.
During 2010 and 2011, Facebook did a great job barking in its own right, turning in higher net income margin numbers than Google Inc (NASDAQ:GOOG). 2012, however, found Facebook Inc (NASDAQ:FB) with a serious case of laryngitis after turning in an embarrassing 1.04% net income margin.
I will keep my shares in Facebook, but I am putting them in the “doghouse,” and I will be watching them to see if they can get their bark back. If they cannot increase the bottom line, I will redeploy the cash to a better investment.
As far as Google goes, I am keeping them on my watch list as I do not currently have cash to invest. If Facebook does not regain its bark, Google just may prove to be the place to invest.
That is my take, what say you? Please leave comments below.
David Paxton owns shares of Facebook. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. David is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Facebook … Where Did My Money Go? originally appeared on Fool.com is written by David Paxton.
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