Professional social networking site LinkedIn has finally filed for an IPO in the United States, with official documents revealing the maximum proposed total offer will be set at $US175 million, although it admits the site will not reach profitability in 2011.
The announcement comes as Microsoft revealed its second-quarter financials, in which it recorded revenue of $US19.95 billion – only slightly above its rival, tech giant Apple.
Online retailer Amazon also announced that it had recorded its first quarter of sales over $US10 billion, a growth rate of 34%, although its shares dropped as this result was under the market’s expectations.
LinkedIn flagged last year that it would be filing for an IPO but it has now lodged an S-1 with the Securities and Exchange Commission, which reveals some interesting details about its internal operations.
The filing comes after reports last month indicated the site was gearing up for a listing by hiring investment banks Morgan Stanley, JPMorgan and Bank of America. A blog post today on the site confirms it has done exactly that.
The company’s revenue was $161 million for the nine months ending September 30, 2010, with profit at $US10 million. This was actually its first profitable year of operation, after the company took a $US3.9 million loss in 2009.
It currently has a cash reserve of $89.6 million.
And those risks seem to remain in place. The company said in its filing that it expects revenue to decline next year and its profit may evaporate due to the number of registered members being so much higher than the number of its active members.
“We expect our revenue growth rate to decline, and as we continue to invest for future growth, we do not expect to be profitable on a GAAP basis in 2011,” it says, adding that “a substantial majority of our page views are generated by a minority of our members”.
“If the number of our actual members does not meet our expectations or we are unable to increase the breadth and frequency of our visiting members, then our business may not grow as fast as we expect, which will harm our operating and financial results and may cause our stock price to decline.”
The problem is that LinkedIn members don’t visit the site on a daily or even monthly basis. This provides a stark contrast to Facebook, which is also preparing for an IPO, given that many of its 500 million members are visiting the site multiple times a day.
However, LinkedIn also points out that its member base grew by 76% through 2008 and 2010, and that half its users are located outside the US, giving it a global reach. It also includes executives from most of the Fortune 500 companies, and the company’s recruiting services were also used by 3,900 firms in 2010.
It also addresses the issue of its larger competition, saying that “other companies such as Facebook, Google, Microsoft and Twitter could develop competing solutions or partner with third parties to offer such products”.
The site’s other main competitors include Xing in Germany and Viadeo in France, according to the filing.
The SEC filing also reveals the company’s largest shareholders: founder and chairman Reid Hoffman and his wife Michelle Yee own 21.4% of the company, with Sequoia Capital owning about 18.9%. Greylock Partners owns 15.8%, with Bessemer Venture Partners owning 5.1%.
Chief executive Jeff Weiner owns 4.1%, chief financial officer Steven Sordello owns 1.1%, along with vice president of product Deep Nishar.
Meanwhile, confidence on Wall Street has been given a boost by Microsoft’s solid financials, in which it recorded revenue growth of 4.9% to $US19.95 billion for its second quarter, although analysts have pointed out the gap between the company and Apple is now thinning.
Microsoft said it had already sold 300 million licenses for Windows 7, with the OS now on 20% of the world’s internet-connected computers.
Profit came to $Us6.63 billion, although this is down from the $US6.66 billion it recorded last year. Revenue grew by 4.9%.
Amazon also released solid results with 34% growth in revenue to over $US10 billion, but investors were disappointed. Revenue came to $US12.95 billion, but analysts were expecting $US13.02 – as a result the company’s shares fell over 8% to $US168.65.
Profit was $US416 million.
And typical of the company, Amazon did not release any sales figures for its Kindle eReader – suspected to be the most popular device on the market. The retailer only states that sales are “in the millions”.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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