LinkedIn Slashes Guidance; Shares Plunge

Industries Dow Jones Newswires

The logo for LinkedIn Corporation, a social networking networking website for people in professional occupations, is shown in Mountain View, California February 6, 2013. LinkedIn Corp on February 7, 2013, reported quarterly profit that beat Wall ... Street expectations and offered a bullish forecast for the new year, boosting shares in after hours trading. Picture taken February 6. REUTERS/Robert Galbraith (UNITED STATES - Tags: SCIENCE TECHNOLOGY BUSINESS) - RTR3DH77 (Reuters)

LinkedIn Corp. slashed its revenue and earnings guidance for the year, citing changes in foreign-exchange rates, advertising headwinds and the impact from a recent acquisition.

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The news sent shares of the highflying stock down about 25% in after-hours trading, erasing nearly $7 billion in market value. The stock recently traded at $190, below its 4 p.m. ET close of $252.13.

For 2015, the professional networking company projects adjusted per-share earnings of about $1.90 for the year, down from its February guidance of $2.95. LinkedIn sees revenue of about $2.9 billion, under its February forecast of $2.93 billion and $2.95 billion.

LinkedIn said that compared with its original forecast, it now sees an additional $50 million impact from recent currency moves. In the second quarter, LinkedIn estimated an additional revenue impact of $13 million.

LinkedIn is somewhat of an anomaly in the social-media industry because it doesn't make most of its revenue from advertising. Its talent-solutions business, which it sells to recruiters, is by far its biggest source of revenue, at roughly 60%. Its premium subscriptions and advertising income streams account for about 20% each.

In the talent-solutions business, LinkedIn said a larger-than-normal amount of account transitions in the first quarter have pushed out customer spending until later into 2015. Meanwhile, in its advertising business, LinkedIn cited the shift to a new suite of products as well as "more pronounced secular headwinds" in the display-ad business, especially in Europe.

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For the second quarter, LinkedIn forecasts adjusted per-share earnings of 28 cents on revenue between $670 million and $675 million. Analysts, on average, were expecting earnings of 74 cents a share on revenue of $717 million.

Earlier this month, LinkedIn agreed to pay $1.5 billion for Inc., a website known for its professional training videos on such topics as Web design and digital photography. The cash-and-stock deal, announced April 9 and expected to close in the second quarter, is LinkedIn's largest.

On Thursday, LinkedIn said that costs from the deal will impact the second quarter and year.

"Longer-term, we expect's contribution to normalize in the back half of 2016 as we rebuild the deferred revenue base and work through the one-time transitional costs," LinkedIn said.

LinkedIn issued its guidance along with its first-quarter results.

The company posted a first-quarter loss of $42.4 million, or 34 cents a share, compared with a year-ago loss of $13.3 million, or 11 cents a share. Excluding stock-based compensation and other items, profit rose to $72.5 million, or 57 cents a share, from $47.3 million, or 38 cents a share, a year earlier.

Revenue increased to $637.7 million from $473.2 million.

LinkedIn had projected earnings excluding items of 53 cents a share on revenue of $618 million to $622 million.

The first quarter "was a solid quarter," Chief Executive Jeff Weiner said in a news release, "During the quarter, we maintained steady growth in member engagement while achieving strong financial results."

The company said membership grew to more than 350 million, up about 16.7% from a year earlier.

(By Josh Beckerman)