By Cat Zakrzewski
LinkedIn Corp.'s stock yo-yoed in after-hours trading Thursday
as investors realized it beat growth expectations because of a
recent acquisition, not due to a recovery in its core business.
The professional-networking site said second-quarter sales
jumped 33% to $711.7 million, surpassing the company's forecast for
revenue of $670 million to $675 million, and the average analyst
estimate on Thomson Reuters of $680 million.
Excluding stock-based compensation and other items, earnings
rose to $71 million, or 55 cents a share, from $63 million, or 51
cents a share, and finished well above the average analyst estimate
of 30 cents a share.
LinkedIn has been reorganizing to retain corporate customers who
use the site for recruitment and to better capture advertising
growth. LinkedIn's clunky transition to mobile has contributed to a
drop in advertising.
However, the spike in earnings didn't come from a turnaround in
its core business, but instead from its $1.5 billion acquisition of
lynda.com, which closed during the second quarter. In the second
quarter, lynda.com, a skills-training video library, contributed
$18 million in sales. That unexpectedly boosted LinkedIn's
numbers.
LinkedIn incorporated lynda.com's sales into its biggest
division, Talent Solutions, a platform recruiters can use to search
for candidates on the site. Sales at the division increased 38% to
$443.4 million.
Shares of LinkedIn fell 4.7% to $216.49 in after-hours trading
after initially rallying more than 10%.
On the back of the acquisition, LinkedIn raised its full-year
revenue forecast to $2.94 billion after cutting it to $2.9 billion
in April.
It said lynda.com will contribute $90 million in sales for the
full year, up from the $40 million it predicted previously. The
company said it expects per-share earnings excluding items of $2.19
for the full year, up from $1.90, but lower than its forecast at
the beginning of the year, indicating that its core businesses
continue to be under pressure.
"Essentially they are lowering their guidance," said Mark
Mahaney, RBC Capital Markets analyst.
LinkedIn has been overhauling both its recruiting tools and
advertising segments. Overall, the company's marketing-solutions
unit, which primarily sells advertising on LinkedIn properties, saw
revenue rise 32% to $140 million. The company is trying to offset
the decline in display ads with more sponsored posts.
However, LinkedIn continued to see declines in its
display-advertising business, which contributed to the company
lowering its forecast in April. In the second quarter, display
revenue fell 30%, wider than the 10% drop in the first quarter.
Advertising "is the area where we are continuing to have limited
visibility," Chief Financial Officer Steve Sordello said on the
analyst conference call.
For the quarter ended in June, LinkedIn reported a loss of $67.7
million, or 53 cents a share, wider than its year-ago loss of $1
million, or a penny a share.
The company wants users to stay on the site longer and use it as
a social platform, not just to update their résumés and search for
jobs.
In addition, LinkedIn has been trying to make its site more
mobile-friendly. In the second quarter, the company said, 52% of
all traffic to LinkedIn came from mobile devices.
A recent American Customer Satisfaction Index report found
LinkedIn was the lowest-ranking social-media site.
Premium subscribers paying for extra features gave the company
particularly low scores. LinkedIn has been responding to user
complaints by retooling its messaging system as well as slashing
the number of emails users receive by 40%.
LinkedIn said that customer complaints about email were cut in
half as a result.
Write to Cat Zakrzewski at cat.zakrzewski@wsj.com
Corrections & Amplifications
LinkedIn lost $1 million in the year-ago quarter. An earlier
version misstated the figure.
Write to Cat Zakrzewski at cat.zakrzewski@wsj.com
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