LinkedIn shares drop 15% after below target forecasts

Professional social networking site LinkedIn saw its share price fall by 15 per cent after delivering worse-than-expected revenue forecasts yesterday.

First-quarter revenue will be $455 million to $460 million, the California-based company said in a statement. Analysts on average projected sales of $469.4 million.

LinkedIn, whose shares have more than quadrupled since the company’s 2011 initial public offering, is headed for its fifth straight quarter of decelerating sales growth.

To expand its potential revenue base, LinkedIn is seeking to reach workers overseas, add mobile features and make acquisitions. The company said yesterday that it bought Bright Media, an analytics company that helps match candidates with the right employers, for about $120 million in cash and stock.

"LinkedIn is continuing to grow, but that growth is slowing because of a scaling up of the business," said Steve Weinstein, an analyst at ITG Investment Research. "As you get bigger, it gets harder and harder to find a lever that can be material to growing your business."

The shares fell as low as $191.13 in extended trading after rising 4.2 per cent to $223.45 at yesterday's close in New York. Net income dropped 67 per cent in the fourth quarter to $3.78 million, or 3 cents a share, from $11.5 million, or 10 cents, a year earlier, the company said. Sales in the period jumped 47 percent to $447.2 million, exceeding the $437.6 million average analyst estimate, according to data compiled by Bloomberg.

Based on the midpoint of its first-quarter forecast, revenue this period will increase about 41 per cent, down from 72 per cent growth in the same period a year earlier. Membership climbed 37 per cent to 277 million from 202 million a year ago, when the number of users increased by 39 per cent. Sales in talent solutions, LinkedIn’s main business, rose 53 per cent to $245.6 million, compared with growth of 90 per cent in the same period last year.

Revenue growth in LinkedIn’s advertising business, called marketing solutions, slowed to 36 per cent from 68 per cent a year earlier, while the premium subscriptions unit increased revenue by 48 per cent, down from 79 per cent in the same period last year.

It's been a mixed quarter so far for the other top social- networking services. Twitter said earlier this week that its user growth was slowing, pushing shares of the microblogging service down 24 per cent yesterday. Facebook last week reported revenue that topped analysts' estimates, with more than half of ad sales coming from mobile devices. The stock soared 14 per cent after the announcement.

Bloomberg