Facebook: Worth More Than Intel?

Paul Ausick

Source: Brian Solis, via Wikimedia Commons
Within the first hour of trading on Monday morning, shares of Facebook Inc. (NASDAQ: FB) have risen more than 3% and the company’s market cap has risen to about $102 billion. Intel Corp. (NASDAQ: INTC) has slipped a little and the chipmaker’s market cap now stands at about $111.5 billion. Can it be that social media will soon be more valuable than the world’s largest maker of semiconductors?

Facebook is already worth more than General Motors Co. (NYSE: GM) and Ford Motor Co. (NYSE: F), double GM and about half again as much as Ford. As recently as early June, Facebook’s stock was trading at just more than half its share price today.

What happened was the company’s second quarter. Facebook demonstrated that it could make serious money in the mobile market. More than 40% of Facebook’s second-quarter total revenues of $1.8 billion came from mobile advertising. Putting advertising in a user’s news feed stream made the difference.

Intel’s second quarter revenues totaled $12.8 billion, and its gross profit margin was around 58%. Not bad, but well below Facebook’s gross margin of just over 74%. For comparison, Microsoft Corp. (NASDAQ: MSFT) posted a gross margin of about 72% in the second quarter. Software margins are high and they stay high for years. Facebook’s foothold in the mobile market should only grow stronger in the near- to mid-term.

Intel is associated with a PC and server market that is gradually losing sales, and the company’s mobile chip business is far from a runaway success. The company’s push to develop an “over-the-top” Internet streaming service could be stalled as well. The chipmaking giant is trying to cast a wider net, but it is not the only company fishing in the pond, and it was very late off the dock.

Facebook’s shares hit a new 52-week high this morning of $41.93. The annual low is $17.55, and volume is very heavy at nearly 44 million shares traded so far today.