Facebook Founder's Management Mettle Faces Critical Test

The marriage of Mark Zuckerberg to Priscilla Chan a day after his Facebook stock offering closed an iconic chapter in American business history.

The May 18 initial public offering of Facebook (FB - News) clinched Zuckerberg's status as a billionaire whiz kid who parlayed a dorm room hobby into one of the world's best-known companies.

But with the IPO launched and champagne glasses put away, CEO Zuckerberg now faces his biggest challenge: keeping nearly 1 billion Facebook users happy, while reassuring shareholders that he knows how to run a profitable company.

In the latter quest, Zuckerberg's off to a bad start. Though he wore a suit to his wedding, Zuckerberg came dressed in jeans and his trademark hoodie to kick off a cross-country road show on May 7 in New York to pitch Facebook's IPO.

Road Show No-Show He attended only two of nine major IPO road show events, surprising some of the large institutions and investors being pitched to bet big money on the social network giant. He may have met some investors privately, but Facebook wouldn't comment.

The other road show events were led by Sheryl Sandberg, chief operating officer, and CFO David Ebersman.

Zuckerberg's absence raises questions about whether he feels confident meeting equity analysts, hedge fund managers, mutual funds and other big investors crucial to valuing Facebook's stock. His choices call into question whether he has the right stuff to be CEO, some analysts say.

"Being the CEO of a public company for the first time is really very difficult," said William Quigley, managing director of venture capital firm Clearstone Venture Partners. "And doing so in one of the most storied companies in history makes that even more difficult. It takes a rare person to do that well.

Many analysts think Zuckerberg has formed a solid management team. Sandberg, 42, was previously vice president of online operations at Google (GOOG - News). Ebersman, 42, was CFO at Genentech.

High-Profile Board Facebook's board of directors includes venture capital giant Marc Andreessen and Netflix (NFLX - News) CEO Reed Hastings. But as CEO, it's Zuckerberg's job to make the final decisions on strategy and answer to shareholders.

"We don't yet know who he really is," said John Challenger, CEO of outplacement firm Challenger, Gray & Christmas. "We don't know if he will have an extraordinary and creative business mind like Steve Jobs or be more like Stephen Wozniak, who was Apple's (AAPL - News) very creative engineer.

Starting a company and running a billion-dollar company require far different skills, says Robert Bontempo, a professor at Columbia University School of Business.

"You can be brilliant at developing a product and raising money to grow the company, but leading as it grows much bigger requires a very different set of skills," Bontempo said.

"There are some vivid examples of people who achieve this, but it's much more common that they don't make the transition from dorm room to a billion-dollar company," he said. "I am skeptical that Zuckerberg can make the transition from product genius to a global company leader.

Michael Dell, like Zuckerberg, started his company in a college dorm. Dell (DELL - News) was founded in 1985 and went public in 1988. In 1992 at age 27 (Zuckerberg turned 28 in May), Dell became the youngest CEO of a company in the Fortune 500, as sales topped $1 billion.

Years later, in 2004, the company sputtered and Dell resigned as CEO, though he remained chairman. Three years later Dell resumed the CEO role.

Steve Jobs founded Apple in 1977 when he was 22, brought it public in 1980 and was forced out in 1985. It wasn't until 1996 that he made his triumphant return.

Google was founded by Larry Page and Sergey Brin in 1998. They brought in seasoned executive Eric Schmidt as CEO in 2001, three years before Google launched its IPO. Page took over as CEO in April 2011.

900 Million Users Zuckerberg launched Facebook at age 20 in 2004. Six years later, the site had 500 million users. Now it has more than 900 million, making it the world's largest social network in a field where many others have withered.

Facebook revenue rose 154% to $1.97 billion in 2010 as earnings per share rose 155%. But in the second half of 2011, earnings and revenue growth began slowing.

And just eight days before its IPO, Facebook warned investment bankers of further challenges ahead, causing them to lower estimates.

The examples of Apple, Dell and Google show that bright founders can stumble or feel a need for someone else to lead the company.

What path Zuckerberg will take is unclear. Reports say he is clear on his weaknesses and seeks counsel from Sandberg and others. But for now Zuckerberg shows a strong desire to remain firmly in control of Facebook.

Zuckerberg retains majority voting power and "will be able to effectively control all matters submitted to our stockholders for a vote, as well as the overall management and direction of our company," according to the company.

"So far you have to give Zuckerberg a big positive," said Challenger. "But you also can't expect a 28-year-old to have the business acumen and experience of a Harvard MBA with 20 years of experience.

A Deep Bench? Quigley applauds Zuckerberg for compiling a top-notch executive staff and board of directors.

"For a company its age, Facebook has among the deepest management benches of any company in Silicon Valley," he said. But it's also clear that Zuckerberg lacks experience dealing with Wall Street money managers.

"It should be a concern," said Quigley. "Investors look to the CEO as the main mouthpiece and visionary, communicating points about where the business is headed.

The stock's performance hasn't inspired confidence. Facebook has fallen 29% from its IPO price of 38.

Zuckerberg will have a chance to display his leadership when Facebook releases second-quarter results, probably next month. Will he take part in the post-earnings conference call with analysts? He is not legally bound to attend.

IBM (IBM - News) has its CFO run its quarterly calls. Steve Jobs, in his final years running Apple, rarely attended. But those are exceptions.

"It would be catastrophic if Zuckerberg did not lead the conference call," said Quigley. "It needs to be his show to talk about where he is taking the company so investors can figure out how to properly value the business.

If Zuckerberg stays away, he said, "I think investors would be shocked and abandon the company."