Facebook sales jump 38%, with mobile boost

Click to check out Facebook's important Q1 stats.

NEW YORK (CNNMoney)

Investors are laser-focused on mobile, which Facebook has said is the key to its future success. Mobile ad sales accounted for 30% of Facebook's total ad revenue in the first quarter of the year -- up sharply from the previous two quarters and from essentially zero just a year ago.

Facebook began working ads into its mobile products only several quarters ago, most notably when it released a new Apple (AAPL, Fortune 500) iOS app in August.

That mobile ad boost has helped increase revenue, but the growth in monthly active users on Facebook's mobile site and apps is slowing. It jumped 54% over the year to 751 million, which is slightly below the fourth quarter's 57% year-over-year jump, and the 61% annual increase in the third quarter.

That growth rate will likely continue to shrink as mobile users come into parity with total users. Facebook reported that overall monthly active users jumped to 1.11 billion in the first quarter, 751 million of whom accessed Facebook on their phones and tablets.

Facebook (FB) shares were essentially flat in after-hours trading following the report.

Facebook founder and CEO Mark Zuckerberg spent a lot of time on the post-earnings conference call talking about advertising, and how the company plans to continue integrating ads without alienating users.

"Over the long term, the thing that's going to drive the business is the ads that are very high quality ... things people are interested in," Zuckerberg said.

Starting with ads in users news feeds last year "was a valuable step," he added. "Anywhere someone is getting content from Facebook, the business model is following naturally." Facebook plans to continue that philosophy as it rolls out new ad products.

COO Sheryl Sandberg said she feels "pretty good" about Facebook's ad formats, but she thinks "there's a lot of room to improve our ads" in terms of quality.

Ad sales helped propel the social network's overall revenue to $1.5 billion in the quarter -- a solid performance in what's generally a soft quarter for ad revenue at most companies. Brands typically spend heavily to market to holiday shoppers in the fourth quarter and ease off at the beginning of the year.

Earnings rose 7% over the year to $219 million, despite being crunched by massive expenses.

Costs jumped 60% over the year to $1.08 billion. Facebook executives had warned during last quarter's earnings call that the company expects expenses to rise by about half this year. Facebook is spending cash on both infrastructure and headcount, and it's putting that money to work: In 2013 so far, the company has already released four major new products.

Graph Search and a News Feed revamp came in the first quarter, while the third and fourth products came too late to be included in Wednesday's results.

Earlier this month brought Facebook Home, a custom startup screen for Android smartphones that will eventually include ads. A week later, Facebook announced "Partner Categories," which lets advertisers target specific users based on their past buying history -- even if the purchases happened offline.

Facebook also revealed that photo-sharing app Instagram reached 100 million monthly active users in the first quarter.

Rival social network LinkedIn (LNKD) is set to report its quarterly finances Thursday after the market closes.

First Published: May 1, 2013: 4:48 PM ET

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Shoppers lash out at stores over Bangladesh

NEW YORK (CNNMoney)

Dozens of consumers took to social networks after more than 400 workers were killed when a garment factory building in Bangladesh collapsed last Wednesday.

The message from shoppers like Judy Caulfield had for retailers: Shame on you.

"Do the people running this company sleep at night knowing that they are partly responsible for the deaths of so many people?" she asked on the Joe Fresh page.

While some wondered how retailers could tolerate such conditions at factories they buy from, others threatened that they would stop shopping at stores connected to the collapse.

"I have a Joe Fresh gift card and was going to go shopping there. Now I'm not so sure," Linda Bowser Fallis posted on Joe Fresh's Facebook (FB)page. "Until companies like yours control the working situation and pay decent wages, it will happen again. And again."

The building that collapsed housed a factory that made goods for Joe Fresh, some of which were destined for J.C. Penney (JCP, Fortune 500) stores, since the brand has a partnership with the department store.

The factories in the collapsed building had, at some point or another, made items for The Children's Place (PLCE), Dress Barn, Benetton and British retailer Primark. One factory, Ether Tex, listed Wal-Mart (WMT, Fortune 500) as one of its buyers, though the retailer said it had no authorized production in the building.

Related: Shoppers face tough choices over Bangladesh

People also unleashed their anger at retailers that didn't have any connections to that specific building, but are known to source from factories located in Bangladesh, like H&M.

One H&M shopper posted that he will start shopping there if the retailer stops "using slave labor in [its] clothing production."

Many of the comments pointed out how little people around the world knew about where their clothes come from, and just how much they cared to know.

"Just wanted to ask if you import any of your clothing from Bangladesh...and if so have [you] done anything to fund...safety programs," Jonathan Gottleib posted on the J.C. Penney Facebook page. "I need to know from each corporation before I decide if I want to buy anything from them."

Jackie Lynch, a Benetton shopper posting from Melbourne, asked how many of the retailer's clothing lines come from Bangladesh and if it can reassure customers that its garments are made in safe factories.

The confusion stems from the fact that companies often aren't transparent about how they monitor production overseas.

Many large companies monitor suppliers and have guidelines on health and safety standards, but experts say that the results of these audits aren't made public. That makes it difficult for any consumer who wants to check if a company is actually conducting the audits or terminating relationships with suppliers who don't meet standards.

Joe Fresh, H&M, Benetton and J.C. Penney didn't respond to questions on what they plan to do about their customers speaking out.

First Published: May 1, 2013: 10:20 PM ET

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ECB meets under pressure to cut rates

Most economists expect the ECB to cut interest rates at its meeting in the Slovak capital Bratislava on Thursday.

LONDON (CNNMoney)

The bank's governing council, meeting in the Slovak capital Bratislava, is under intense pressure to cut interest rates for the first time in 10 months as the prospects of economic recovery in the eurozone this year begin to fade.

Unemployment across the 17 eurozone states hit a new record just above 12% in March, inflation fell sharply in April and recent surveys suggest the German economy may be slowing, dragged back by the deep recession that is leaving its scars across southern Europe.

European stocks have rallied and yields on government bonds have fallen since mid-April as investors bet on the ECB cutting its main refinancing rate to a new record low of 0.5%. The bank has held the rate at 0.75% since July 2012.

Related story: Federal Reserve sticks with stimulus

More bad news came Tuesday when Spain, the eurozone's fourth largest economy, reported a seventh consecutive quarter of recession. The annual pace of contraction accelerated in the first three months of this year to 2%.

Global growth concerns are also bolstering the case for a rate cut, even if it has little more than a symbolic impact.

Related story: Fed will struggle to unwind its giant trade

Analysts say a cut will provide only marginal relief for the weakest eurozone economies because it will do little to reassure banks that are restricting lending to small and medium-sized firms.

Some ECB watchers expect President Mario Draghi to unveil other measures to improve financing conditions. But even if he does, they're unlikely to include the kind of huge bond-buying programs that have been used by other major central banks to support markets and growth.

And while there have been signs that EU leaders may be prepared to ease up on the pace of austerity, the eurozone is not about to imitate Japan and embark on a new round of short-term borrowing to generate growth. So the ECB is still the only game in town.

First Published: May 2, 2013: 12:28 AM ET

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Investors: Look beyond Merck's patent loss

Merck's diabetes drug, Januvia, is expected to add $750 million to sales growth annually through 2020.

(Money Magazine)

Since last fall -- shortly after the patent on top seller Singulair expired, exposing the asthma drug to cheap competition -- Merck (MRK, Fortune 500) shares have sunk 3%. Adding to the Street's fears: the company's difficulties in developing next-generation blockbusters. What investors don't realize, though, is that Merck's patent and pipeline problems aren't as dire as they seem.

Less vulnerable

Product development is a problem -- but it's hardly the whole story.

Potential drug revenue loss to generics: 2014-2017
Merck	2.8%
Pfizer	4.7%
Eli Lilly	11.6%

Source: Morningstar

Loss of Singulair patent

For nearly a decade, drug manufacturers have been plagued by patent expirations, which have allowed makers of cheaper generic drugs to swoop in and take revenues.

"The large pharmaceutical companies have all been going through this," says Erich Patten of the Cutler Equity Fund, which owns Merck shares. Pfizer (PFE, Fortune 500) experienced it in 2006 with the antidepressant drug Zoloft and in 2011 with its cholesterol fighter Lipitor. "It's just been Merck's turn recently," Patten says.

After Singulair went off patent, quarterly sales of the respiratory medication plunged from $1.5 billion in the fourth quarter of 2011 to $480 million late last year. Investors are now waiting to see if Merck can recover the way that Pfizer did.

A healthy pipeline

The loss of Singulair is a big blow, but, going forward, patent expirations threaten less than 3% of Merck's sales -- far less than the industry average.

Merck also "has one of the healthiest base business of its U.S. major-pharma peers, putting less pressure on the company's pipeline to generate growth," noted J.P. Morgan analyst Chris Schott in a recent report.

The diabetes drug Januvia, for instance, is becoming as big as Singulair was and is expected to add $750 million to sales growth each year from now through 2020.

Related: Reduce the steep cost of diabetes

As for new blockbusters, clinical trials of treatments for osteoporosis, cholesterol, and heart disease have been disappointing. To turn things around, though, Merck has hired the former chief of R&D at Amgen.

A generic price

Even with the Singulair loss, Merck's overall revenue is expected to grow 2% annually for the rest of the decade. Though modest, that's in line with the industry average and slightly ahead of sales growth at its chief rivals. As for Merck's earnings, they're expected to climb at a healthier 8% annual clip.

Related: 6 high-dividend, blue-chip stocks

Despite these facts, investors continue to fixate on Singulair. Merck shares are trading at cheap levels relative to the industry average and pay a generous 4.0% yield. That payout is driven in part by Merck's industry-leading cash cushion of more than $13 billion, a stash that has also helped the drug giant spend more on R&D last year than rivals Eli Lilly, (LLY, Fortune 500) Pfizer, and Bristol-Myers Squibb (BMY, Fortune 500).

First Published: May 1, 2013: 6:17 AM ET

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Here's the form to apply for Obamacare coverage

NEW YORK (CNNMoney)

This week, the government unveiled the forms shoppers will fill out to apply for coverage through Obamacare. The government won't start accepting and processing those applications until later this year.

The form for individuals is a scant three pages -- a big improvement from the 21-page draft version circulated earlier this year. The revised application, unveiled Tuesday by the U.S. Department of Health and Human Services (HHS), asks individuals for little more than their personal information, Social Security number, citizenship, job and income details, and current health coverage. Income, citizenship status and other information will be verified by other federal agencies, according to Centers for Medicare & Medicaid Services, the HHS unit that is coordinating the process.

Those applying for family coverage will need to fill out an 11-page application that delves into additional details.

The forms are the latest step in the race to have the state-based health insurance exchanges ready for open enrollment starting October 1. At that time, consumers can submit their information through the paper forms, by phone or online. Those filing the paper form will receive a response within one to two weeks on whether they are eligible for expanded Medicaid coverage -- which insures adults with incomes up to 138% of the poverty line in states that agreed to widen their programs -- or for coverage in the exchanges.

The response will also explain what subsidies, if any, the applicant qualifies for. Americans with incomes of up to 400% of the poverty line -- roughly $45,000 for an individual and about $92,000 for a family of four -- will receive help paying for their premiums. Coverage begins January 1, 2014.

The application released this week will be used in the 33 states with federally managed exchanges. It will also be available to the other 17 states that chose to design their own exchanges.

The state-based insurance exchanges are a cornerstone of the the Affordable Care Act, the formal name for Obamacare. The Congressional Budget Office is forecasting that 7 million people will receive subsidized through the exchanges next year, a number it expects to grow to 24 million by 2016.

The federal government has a long way to go to convince people to sign up for Obamacare, though. Some 42% of Americans don't realize the law is in effect, including some who thought Congress or the Supreme Court had nullified it, according to a new Kaiser Family Foundation poll. Around half don't don't understand how it will affect their family.

First Published: May 1, 2013: 6:26 AM ET

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Federal financial aid form to recognize same-sex parents

Federal aid decisions will soon be based on the financial situations of both parents in same-sex couples.

NEW YORK (CNNMoney)

Starting with the 2014-2015 Free Application for Federal Student Aid (FAFSA), the form college students use to apply for federal financial aid, the department will use income and financial information from both same-sex parents to determine aid eligibility.

Currently, only one parent in a same-sex couple can be included on the form, since the Defense of Marriage Act, which defines marriage as between one man and one woman, prevents their marriages from being recognized by the federal government.

Related: 'What legalizing gay marriage means for our money'

Same-sex couples still won't be classified as married on the new form, but they will be able to identify as "unmarried and both parents living together." Other language on the form will also be modified -- "mother" and "father" will become "Parent 1" and Parent 2," for example.

When both same-sex parents are included on the FAFSA, their combined incomes and financial situations will be used to determine the financial need of a student, which could result in less aid for some students. For a small number of students, however, including an additional family member on the form could actually boost the amount of aid -- if that person's income is low enough.

Related: Marriage ruling could save same-sex couples thousands

"These changes will allow us to more precisely calculate federal student aid eligibility based on what a student's whole family is able to contribute and ensure taxpayer dollars are better targeted toward those students who have the most need, as well as provide an inclusive form that reflects the diversity of American families," U.S. Secretary of Education Arne Duncan said in a statement.

First Published: May 1, 2013: 6:30 AM ET

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Manufacturing growth falters in China

HONG KONG (CNNMoney)

China's official purchasing managers' index posted a decline in April, falling to 50.6 from 50.9 the previous month, according to the national statistics agency. A reading above 50 signals expansion in the manufacturing sector.

The disappointing result comes just days after global bank HSBC said its "flash" index of purchasing managers' sentiment fell to 50.5 in April from March's final reading of 51.6.

HSBC will release its final reading on Thursday.

"PMI dropped despite a favorable seasonal factor," wrote Zhiwei Zhang, an economist at Nomura, "and reinforces our view that growth will likely weaken in the second quarter."

The strength of manufacturing in China is considered a barometer of the global economy because of the nation's role as a powerhouse exporter. Because it makes up a large part of China's economy, manufacturing plays an important role in shaping domestic policy.

Related story: China cracks down on military use of luxury cars

China's economy has averaged growth of around 10% a year for the past three decades, allowing the nation to rocket past competitors.

While the growth slowed in 2012 to 7.8%, that figure topped government targets and analyst expectations, signaling an exit to the slowdown that had worried economists.

But China's new leadership -- President Xi Jinping and Premier Li Keqiang -- inherits a country facing challenges over the environment, the rule of law and economic inequities.

The path forward, most analysts agree, requires China to move toward an economy in which consumption drives growth -- no easy task.

Local party officials have long depended on investment spending to maintain clout -- a pattern that reform would undercut. The shift could also undermine the breakneck pace of economic expansion to which China has grown accustomed, at least in the short term.

First Published: April 30, 2013: 11:26 PM ET

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Peter Thiel: Twitter will outlast the New York Times

BEVERLY HILLS (CNNMoney)

In a debate with Andreessen at the Milken Institute Global Conference Monday, Thiel, a co-founder of PayPal, said he expects that Twitter's roughly 1,000 employees will have jobs a decade from now.

The business case for Twitter is solid, Thiel said.

Related: Marissa Mayer's first-year pay is $6 million

He contrasted the future of Twitter with that of The New York Times, a print media vanguard that he says is not guaranteed a future in the digital age. Employees of the paper, Thiel cautioned, should be worried about the longevity of their jobs.

Andreessen, creator of the Netscape browser, has a vested interest in Twitter's future. His venture capital firm Andreessen Horowitz -- or @a16z in Twitter parlance -- spent a reported $80 million on a stake in Twitter in early 2011 when the social media company was valued at around $4 billion.

Twitter is expected to go public within the next two years. Thiel, who doesn't tweet or own shares of the company, said the company's estimated $10 billion current valuation was fair.

Yet Thiel bemoaned what Twitter's success says about the current state of innovation. The slogan of Thiel's investment fund Founder's Fund is "we were promised flying cars, and instead what we got was 140 characters," a reference to the length of a tweet.

Twitter, Thiel said, shows that current innovative technologies haven't fundamentally reshaped the lives of individuals or caused a major change to life expectancy or the overall economy.

Related: Alibaba takes stake in 'China's Twitter'

"New technologies are being used to send pictures of your cat halfway around the world," Thiel said. "We've talked ourselves into thinking that throwing cats at birds is the best we can do. We can do more than that."

Andreessen disagreed, comparing Twitter to the printing press and claiming the technology is a fundamental breakthrough in how humans communicate. "Twitter is instant global public messaging for free," he said.

Andreessen told CNNMoney that he's been encouraging the companies in his portfolio to wait as long as possible before going public, but said Twitter is one of the few that will be ready in 2014 or 2015.

If Twitter does go public, it's expected to be the largest offering since Facebook. With Facebook's (FB) stock down 29% from its IPO nearly a year later, investors might prove wary of the next big social media IPO.

Andreessen admitted on his panel with Thiel that he feels a bit of schadenfreude seeing the recent struggles of the New York Times as the Internet cuts down on its print profits. Andreessen said that during the 1990s, the publication often dismissed the Internet as a technology that had little chance of widespread adoption.

"It causes me a certain amount of pleasure today watching the New York Times Company try to cope with the consequences of the technology they laughed at," Andreessen said.

Those of you laughing at the cat pictures on Twitter, watch out.

First Published: May 1, 2013: 12:00 AM ET

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Americans face tough choices over Bangladesh

Many of the world's largest retailers have clothes made in Bangladesh.

NEW YORK (CNNMoney)

That's because just about all, or 98%, of clothes sold in the U.S. are made overseas, according to the Apparel and Footwear Association. Also, companies don't tell consumers if any of their suppliers violate safety standards.

The recent spate of deadly accidents in garment factories in Bangladesh has caught international attention. Last week, nearly 400 workers were killed when a garment factory building collapsed. The tragedy follows two more factory fires in November that killed and injured more than 100 workers.

A very large portion of U.S. apparel imports comes from Bangladesh. Many companies have been shifting orders there, because labor costs in the country are so low. Bangladesh is on track to surpass China within the next seven years as the largest apparel manufacturer in the world.

It is already the third biggest exporter of apparel to the US., behind China and Vietnam. The value of clothing imported from Bangladesh into the U.S. has quadrupled over the last decade to $4.5 billion annually, according to the apparel group.

Related: Cheap clothes lead to danger and tragedy in Bangladesh

Bangladesh has about 4,500 garment factories that make clothes for global retailers, including Gap (GPS, Fortune 500), H&M, Wal-Mart (WMT, Fortune 500), J.C. Penney (JCP, Fortune 500) and Sears (SHLD, Fortune 500), as well as smaller retailers like Benetton, The Children's Place (PLCE) and Joe Fresh.

Many large companies, including Wal-Mart, J.C. Penney and Sears, have supplier guidelines on health and safety standards. They set expectations for working and building safety conditions, wages and labor practices that their suppliers must meet. The retailers claim they conduct audits to ensure their suppliers are complying with standards.

Experts say the problem is that the results of these audits aren't made public, so it's hard to hold the stores accountable. There is no way for a consumer to know if a company is actually conducting the audits or terminating relationships with suppliers who don't meet standards.

"In terms of the factory and the factory conditions where an item is made, the consumer has no information, the audits are never made public and that's how retailers want it," said Scott Nova, the Workers' Rights Consortium's executive director.

This is also true for retailers who invest money and publicize what they do to monitor suppliers. Wal-Mart made a big public push earlier this year for its compliance program, saying it conducts thousands of audits each year and that factories will have to pass audits before they are allowed to do business with the retailer.

But last week, Wal-Mart would not say if any of the factories in the collapsed building had been audited.

"Companies don't want consumers to understand the reality of what's going on -- the labor abuses, the low wages -- that make products for the U.S. market," Nova said. "Customers do care, but they don't have enough information about where and how products are made to react."

First Published: May 1, 2013: 12:14 AM ET

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China cracks down on military use of luxury cars

A fleet of luxury sedans parked outside last year's 18th National Congress of the Communist Party of China.

HONG KONG (CNNMoney)

China has banned the use of military license plates on expensive cars, according to official state media. The new guidelines were issued by the Central Military Commission, and are the latest anti-corruption measures undertaken by the image-conscious government of President Xi Jinping.

Military license plates had been something of a golden ticket in the past, with some owners openly flouting traffic rules and skipping required toll payments. Some reports suggest the plates were occasionally auctioned off to civilian buyers.

Xinhua, China's state news agency, suggested the problem is one of image.

"In recent years, irregularities in the use of military cars have drawn public attention," the agency said. "Some internet users have posted snapshots on popular Twitter-like microblogs featuring limos with military license plates."

Related story: Wild cars from the Shanghai Motor Show

According to the new regulations, military plates are now prohibited on Mercedes-Benz, BMW, Lincoln, Cadillac, Volkswagen Phaeton, Bentley, Jaguar and Porsche models. SUVs including the Porsche Cayenne and Audi Q7 were also singled out.

Put more broadly, the plates cannot be used on cars with engines larger than three liters, or a value over $73,000. To accomplish the change, the army will issue new plates designed to stop counterfeiters, and collect all previously-issued plates.

Luxury auto sales are booming in China, and many automakers are turning to the growing market in search of sales. Government officials are often among the buyers, with the Audi A6 being a particularly popular choice.

Related story: China luxury battles shifting tastes

The People's Liberation Army General Logistics Department said the policy change was needed to maintain the military's reputation.

"The move is meant to crack down on the creation, sale and use of counterfeit military vehicle plates and root out loopholes in military vehicle management, so as to maintain social harmony, stability and the reputation of the military," state media said, quoting a statement issued by the agency.

Xi, China's newly-installed president, has made the fight against corruption one of his government's top priorities.

He has exhorted Communist Party officials to "build a clean government, show self-discipline and restrain their relatives and associates."

The stakes are high, with Xi warning that graft and corruption could lead to "the collapse of the Party and the downfall of the state."

-- CNN's Vivian Kam contributed to this report.

First Published: April 29, 2013: 2:10 AM ET

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