Facebook Reports Lousy Q1 Ahead of IPO

People planning on snapping up Facebook shares in its upcoming IPO got a nasty surprise as the company announced its first quarter-to-quarter revenue and profit slide in at least two years. Facebook blamed the drop on seasonal advertising trends, but "it was a much faster slowdown than we would have guessed," one analyst tells Reuters. "No matter how you slice it, for a company that is perceived as growing so rapidly, to slow so much … will be somewhat concerning to investors."

Net income fell 12%, to $205 million, down from $233 million a year earlier, in part because the company has roughly doubled its spending in the past year. The numbers indicate that "Facebook is not going to have an easy time meeting high expectations of the public market," one investor says. "I'm still encouraging people to participate in the IPO, under the acknowledgement that it could be a bumpy ride." (More Facebook stories.)