Thursday, May 19, 2011

LinkedIn IPO

LinkedIn is a great way to reconnect with friends, colleagues and, on occasion, business opportunities on the internet.

Think of it as Facebook for business.

LinkedIn just went public, valuing the company at $4.5 billion. This seems pretty steep for an offering for a company with less than $250 million in revenue last year but, hey, maybe I'm just jealous that I didn't think of the idea.

So what made LinkedIn go public now?

Well, I don't know any of the principals of the company, and most Street analysts just shake their head, but I suspect it boils down to just one idea:

They're going public because they can reap billions at a time when no one seems to care that their revenue growth is slowing, and they probably will not be profitable this year.

I'm going to continue to use LinkedIn, and I suggest you do as well. But I would be very careful of this particular offering.

Here's the take of the Wall Street Journal; I have added areas of emphasis:

In 2010, revenue at LinkedIn doubled to $243 million and net income was $15.4 million, compared with a loss of $4 million a year earlier. In the first quarter of 2011, revenue also doubled to $94 million and net income rose 14% to $2.1 million from a year earlier.

The company expects its revenue growth rate to slow and warns that it won't be profitable in 2011 as it invests in what it calls future growth, such as technology and product development. It also warns that it expects that its results in the future could become more cyclical and seasonal.

Caveat emptor.