LinkedIn Drops After $1.6 Million Loss

By Ari Levy - Nov 4, 2011 4:23 AM GMT+0700

LinkedIn Corp., the biggest professional-networking website, reported a third-quarter loss of $1.6 million as the company boosted spending on research and development. The stock dropped in extended trading.

The net loss of 2 cents a share compares with a profit of $3.96 million, or 2 cents, a year earlier, the Mountain View, California-based company said today in a statement. Revenue more than doubled to $139.5 million, topping the $127.4 million average estimate of analysts in a Bloomberg survey.

LinkedIn, which first sold shares to the public in May, is increasing spending on research, sales and marketing, and office expansions to boost the company’s global presence and attract more recent college graduates to the site. Operating costs more than doubled in the period to $134.9 million. During the quarter, the company opened an office in Tokyo and acquired IndexTank to improve its search technology.

“LinkedIn plans to maintain a long-term perspective with investment in our key strategic areas,” Chief Financial Officer Steve Sordello said in the statement.

LinkedIn dropped as much as 13 percent to $76.11 in extended trading after the report. The stock rose 3.6 percent to $87.50 at the close in New York. It has surged 94 percent from LinkedIn’s initial public offering on May 18 through today’s regular trading, while the Standard & Poor’s 500 Index has dropped 5.9 percent over that stretch.

High Multiple

After the stock’s rise since the IPO, LinkedIn is trading at 12.1 times projected sales over the next year, compared with a ratio of 5.4 for Google Inc. Even though LinkedIn beat most projections, it’s hard to justify that valuation, said Herman Leung, an analyst at Susquehanna International Group LLP in San Francisco.

“With the stock trading at the multiple it’s trading at, everything has to be perfect,” said Leung, who has a “neutral” rating on the stock.

Separately, LinkedIn said it plans to raise as much as $500 million in a stock sale. About $100 million of shares will be sold by the company, with the rest coming from existing stockholders.

LinkedIn increased its membership 63 percent from the year earlier to 131.2 million. Revenue in its hiring solutions business more than doubled to $71 million. Marketing solutions sales more than doubled to $40.1 million, and premium subscriptions revenue climbed 81 percent to $28.4 million.

Profit excluding some costs in the period was $6.6 million. LinkedIn forecast sales for the full year of $508 million to $512 million and earnings before interest, taxes, depreciation and amortization of $83 million to $85 million. Analysts on average predict revenue of $488.9 million and Ebitda of $71.1 million.

(LinkedIn will host an earnings conference call at 5 p.m. New York time. To listen, click on http://investors.linkedin.com

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net