LinkedIn forecasts weak first-quarter profit, shares plunge

Thu Feb 4, 2016 7:46pm EST
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By Sai Sachin R

(Reuters) - LinkedIn Corp forecast first-quarter revenue and profit below Wall Street estimates as growth slows in its ads business and its hiring services face pressure outside North America, dragging its shares down 28 percent after the bell.

The operator of the world's largest online network for professionals reported its slowest growth in quarterly online ad revenue in more than two years.

Online ad revenue growth slowed to 20 percent in the fourth quarter from 56 percent a year earlier as automated ads offered by Alphabet Inc's Google make its traditional ad displays less attractive to advertisers.

LinkedIn has been spending heavily on expansion by buying companies, hiring sales personnel and growing its presence in China and other markets outside the United States as it tries to strengthen its core recruitment services business.

The business, which connects recruiters and job seekers, is now facing pressure in Europe, the Middle East, Africa and Asia-Pacific due to "current global economic conditions," Chief Financial Officer Steve Sordello said on Thursday.

The company said it would phase out an online ad product, Lead Accelerator, in the first half of 2016, which would hurt its revenue by at least $50 million this year.

"While initial demand was solid, the product required more resources than anticipated to scale," Sordello said.

LinkedIn is trying to focus on some higher return-on-investment opportunities, but it will hurt growth in the near term, ITG Investment Research analyst Steve Weinstein said.   Continued...

The logo for LinkedIn Corporation is shown in Mountain View, California in this February 6, 2013 file photo.  REUTERS/Robert Galbraith