LinkedIn Sales Forecast Trails Estimates as Growth Slows

Oct. 29 (Bloomberg) -- LinkedIn issued a sales forecast that lagged analysts’ estimates as growth slowed in the subscription and advertising businesses. Jon Erlichman reports on Bloomberg Television's "Street Smart." (Source: Bloomberg)

LinkedIn Corp. (LNKD), the biggest professional-networking site, issued a sales forecast that lagged analysts’ estimates as growth slowed in the subscription and advertising businesses.

Revenue in the fourth quarter will be $415 million to $420 million, trailing analysts’ average projection of $438.9 million, according to data compiled by Bloomberg. Sales in the third quarter climbed 56 percent to $393 million, the Mountain View, California-based company said in a statement today.

Faced with decelerating growth, LinkedIn is seeking to lure new users overseas and generate additional revenue from its 259 million members by upgrading its software for mobile devices. The stock has surged more than fivefold since the company’s initial public offering in May 2011, topping other social-media companies like Facebook Inc.

“As you get bigger, as you’re growing off a bigger base, growth on a percentage basis is going to slow,” said Colin Gillis, an analyst at BGC Partners in New York, who recommends buying the shares. “People have priced that rapid growth into their valuation.”

Total membership climbed 38 percent from 187 million a year ago, when the number of users increased by 43 percent. Sales in the talent solutions unit, LinkedIn’s biggest business, increased 62 percent to $224.7 million, compared with growth of 95 percent in the same period last year.

Photographer: Andrew Harrer/Bloomberg

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Photographer: Andrew Harrer/Bloomberg

Growth is decelerating as LinkedIn Corp. seeks ways to generate additional revenue from its 259 million members.

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LinkedIn fell as much as 7.3 percent to $229 in extended trading. The shares gained 1.7 percent to $247.14 at the close in New York and have more than doubled this year.

While its forecast fell short, LinkedIn’s third-quarter sales topped analysts’ average estimate of $385.2 million, according to data compiled by Bloomberg. The company has exceeded sales estimates in all 10 quarters as a public company, though in the third-quarter it topped predictions by the slimmest margin yet.

“These guys have earned a reputation for putting up pretty conservative guidance and exceeding it,” said Tom White, an analyst at Macquarie Capital USA in New York.

The company reported a net loss of $3.36 million, or 3 cents a share, in the latest quarter, compared with a profit of $2.3 million, or 2 cents, a year earlier.

Sales in the premium subscriptions unit rose 61 percent to $79.8 million, slowing from 74 percent growth a year earlier, while advertising revenue increased 38 percent to $88.5 million, compared with 60 percent growth in the third quarter of 2012.

Members who use LinkedIn’s mobile site and applications are more than twice as active as those who only visit from personal computers, LinkedIn said last week. As LinkedIn builds its revenue model for smartphones and tablets, mobile viewing already accounts for more than half of sales from an ad product called sponsored updates.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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