Facebook Profit Dips As Users Hit 901 Million

Facebook on Monday reported declining profit despite a 45 percent uptick in revenue and a leap to 901 million users.

The social-networking giant unveiled its latest growth figures as well as an agreement to acquire 650 patents from Microsoft for $550 million in cash.

Facebook's profit in the quarter, ended in March, slipped to $205 million, down 12 percent from a year ago. Revenue came in at $1.1 billion for the quarter. The company reported increased expenses for marketing, sales, and research and development, according to Securities and Exchange Commission documents.

This was a "transition quarter" for Facebook involving new advertising services and mobile efforts, expected to affect revenue later in the year, researcher eMarketer says.

Facebook's deal with Microsoft for patents underscores the increasingly defensive moves it is making as it prepares to go public next month and tries to insulate itself from the risks of a patent lawsuit from Yahoo. The Facebook IPO could be the largest-ever Internet public offering.

"This is a little bit of a slap on the face" of Yahoo, says Gartner analyst Brian Blau. "It's a chess move."

Last month, Facebook agreed to acquire 750 patents from IBM, a move that came on the heels of Yahoo suing Facebook over patent-infringment allegations. And Facebook just two weeks ago agreed to acquire Instagram in a deal valued at $1 billion -- widely seen as an effort by the social network to shore up its shortcomings in mobile.

Microsoft's patents in the deal Monday were bought recently from AOL. Under that deal, the software giant secured 925 U.S. patents and patent applications as well as a license to AOL's remaining 300 patents, which weren't for sale, for nearly $1.1 billion. Facebook's legal chief, Ted Ullyot, said the patent agreement is part of an ongoing process of building a patent portfolio to protect the company's long-term interests.

Microsoft will keep 275 of the AOL patents and applications and have a license to the 650 AOL patents going to Facebook.

Microsoft is both an investor in Facebook and a rival in online advertising.

The companies did not disclose specifics about the patents involved in the sale.

Facebook will have $6.1 billion in full-year revenue, vs. $3.7 billion in 2011, eMarketer forecasts.

- USA Today