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Facebook Pokes Employees Where It Hurts


Plan allowing staff to cash out shares postponed.


The Status Updates of Facebook employees could be grim today.

Via company-wide email yesterday, CEO Mark Zuckerberg regretfully informed his staff they couldn't cash out a small portion of their shares before the holidays as had been previously promised.

The plan to allow employees to sell off a small amount of shares, formulated by Zuckerberg last August, was intended to compensate workers in the absence of an IPO or sale. It was regarded at the time as an unorthodox practice for a privately held company.

Analysts cite rampant Silicon Valley layoffs and the NASDAQ's freefall as the main culprits behind the cancellation. In his email, Zuckerberg said the plan was being placed on indefinite hiatus. So, it seems Facebook employees will have to wait until the economy has officially bounced back to raise the question again.

Another contributing factor is Facebook's inability to find any potential buyer since this summer.

Last year, Microsoft (MSFT) took a 1.6% stake in Facebook for $240 million - a number that valued the social network at $15 billion. But ever since the summer, the company has been unable to court investors wary of making big bets on even the sexiest Internet start-ups.

Facebook has experienced some other setbacks. When 3 of its 4 co-founders left in 2007, it was the beginning of a small exodus for top talent. Zuckerberg has also had to contend with allegations that he stole ideas and layouts from past partners.

But the news isn't all bad. According to findings by the US College Student Report, competitor MySpace (NWS) continues to give up ground to Facebook, especially in the coveted college-student market: More than 80% use Facebook, compared with 40% for MySpace.

If employees can ride out the downturn, their hard work (and patience) may be handsomely rewarded after all.

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