Sat, Aug 06, 2011 - Page 10 News List

LinkedIn stuns analysts by delivering Q2 profits

AP, SAN FRANCISCO

In its first quarterly update since its initial public offering (IPO), online professional networking service LinkedIn Corp reassured investors who have been buying into the hype surrounding a promising crop of Internet companies.

Its second-quarter results announced on Thursday injected some hope into a grim stock market and could feed the mounting excitement for upcoming IPOs of stocks from other rising Internet stars, such as online coupon Groupon Inc and Web game maker Zynga Inc.

The reason — LinkedIn reported the accelerating revenue and membership growth that it needed to support its lofty stock price and delivered higher earnings when analysts were bracing for a loss.

It marked the first update since LinkedIn’s headline-grabbing IPO in May with a price of US$45.

HIGHER EARNINGS

LinkedIn earned US$4.5 million, or US$0.04 per share, in the April-to-June period. That contrasted with earnings of US$938,000, or US$0.02 per share, in the same period last year.

Revenue more than doubled from last year to US$121 million, while membership climbed 61 percent to 116 million as at the end of June.

Analysts, on average, had projected a loss of US$0.04 per share on revenue of US$104.5 million, according to FactSet.

LinkedIn shares rose US$3.50, or almost 4 percent, to US$99.02 in extended trading on Thursday to recover part of a steep decline that occurred during the regular trading session amid a sweeping market sell-off.

“The IPO and attention certainly helped raise the company’s profile and compounded the momentum we had already been seeing,” LinkedIn chief executive Jeff Weiner said in a Thursday interview.

PUNY PROFIT

The earnings in LinkedIn’s most recent quarter represented the most money the company has made in any three-month period so far in its eight-year history. However, it’s still a puny profit for a company whose market value is sitting at about US$10 billion.

Losses could loom ahead too.

LinkedIn has indicated it is willing to sacrifice short-term earnings to increase spending on technology and new product development.

Growth is also expected to slow, partly because of economic uncertainty and partly because of the temporary lift provided by the IPO publicity.

LinkedIn expects third-quarter revenue to climb as high as US$125 million, which would be slightly below the second-quarter growth rate of 120 percent. For the full year, LinkedIn sees its revenue rising to as high as US$485 million, roughly doubling from US$243 million last year.

CONNECTING TALENT

The company, which is based in Mountain View, California, thinks it is better positioned to weather another recession than most businesses because its network has been designed to help people find better jobs.

“We connect talent with opportunity on a massive scale,” Weiner said in the interview. “When times get tough like this, I think our platform can make a real difference in the lives of people.”

LinkedIn gets more than two-thirds of its revenues from fees that it charges companies, corporate recruiting services and other people who want broader access to the profiles and other data on the company’s Web site. The remainder comes from advertising.

In a conference call with analysts, Weiner said LinkedIn is adding about two members every second. That is a pace that would give LinkedIn about 132 million registered accounts by the end of September. Weiner told analysts the company had more than 120 million members as of Thursday.

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