U.S. Markets closed

LinkedIn plunges 25% on disappointing guidance

Aaron Pressman
The logo for LinkedIn Corporation, a social networking networking website for people in professional occupations, is shown in Mountain View, California February 6, 2013. REUTERS/Robert Galbraith

LinkedIn (LNKD) shares collapsed by 25% on Thursday after the company revealed a disappointing outlook.

The leading online professional network said it expects adjusted per-share earning of 28 cents on sales of $670 million to $675 million for the current quarter, which ends June 30. Meanwhile, Wall Street analysts were looking for earnings of 74 cents a share, on revenues of $719 million.

Shares of the company, which has more than 350 million members, plummeted in extended trading, in contrast to gains of close to 65% over the past 12 months. The first quarter has been a tough one for formerly hot online companies like LinkedIn. Shares of Yelp (YELP) plunged to a near-two-year low on Thursday after it posted disappointing results and Twitter (TWTR) shares have lost 25% since its weak report on Tuesday.

The shortfalls appear to have arisen from the company’s $1.5 billion acquisition of online content site Lynda.com, announced on April 9, as well as a grab-bag of other problems and initiatives. CEO Jeff Weiner and CFO Steve Sordello, in a discussion of the results, blamed the shortfalls on larger-than-normal changes among sales staff, which caused more shifting of accounts than in prior years, as well as the stronger value of the U.S. dollar against other currencies.

"We underestimated the impact from this large initiative with respect to short-term churn and 2015 revenue,” Sordello said of the sales staff changes. He also said the Lynda.com acquisition caused some trimming of the company’s forecast for the remainder of the year.

 CEO Weiner focused on the sales staff turnover.

 “We have aggressively grown our sales force over the past few quarters, and we are accelerating R&D headcount hired to work on our monetized products,” he said in a discussion of the results. While the hiring will be “impacting” LinkedIn’s profits for the rest of 2015, “we anticipate (it) will position us well for 2016 and beyond,” he said.

The explanations did nothing to halt the share price decline, however.

For the just-completed first quarter, LinkedIn's results exceeded analyst estimates. Adjusted earnings of 57 cents a share were a penny better than the average analyst estimate and sales of $638 million were also just above the average forecast of $636 million.