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LinkedIn to Buy Monster?

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As per a news release from Reuters, LinkedIn (LNKD) and Silver Lake has expressed interest to take over Monster Worldwide Inc (MWW), according to sources.

Headqartered in New York, Monster Worldwide is an online recruitment firm of the parent company Monster.com, the leading career website in the world.

The news has led to a surge in the stock price of Monster. It was rumored earlier that management might sell a part or all of its business as the company is facing tough times for quite some time. Monster Worldwide is considering strategic alternatives to boost shareholder value in the coming months to combat the extreme situation. 

The business is under significant pressure with customer demand for online advertising on a downtrend. The primary source of revenue for the company is recruitment advertising. Management is concerned about a recessionary environment. Firms around the world are scaling back their hiring plans and more carefully controlling their spending.

Competition has intensified over the last few years in the online employment advertising market, which in our view has resulted in Monster losing share. The barriers to entry into Internet businesses are relatively low.

Though Monster once had a dominant position, there are now several national competitors (i.e., CareerBuilder) as well as other niche sites. Many of the cutting-edge recruiters have reduced their use of job boards in favor of alternative social media sites, such as LinkedIn and Twitter.

In addition, the macro economic outlook remains uncertain. The slowdown in Europe has adversely impacted the company’s business with no relief expected in the near term. Management expects another recession in 2012.

We continue to maintain a Neutral recommendation on the stock. Our recommendation is supported by Zacks #3 Rank, which translates into a short-term rating of Hold. 

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