Linkedin Corporation (NYSE:LNKD) has been relatively quiet since the site confirmed of a security breach that showed millions of passwords and other sensitive data. Some say this silence has really hurt Linkedin’s reputation, especially among business professionals.
The bad news is that even after a few days we still do not know the full extent of the breach. Cyber security specialists are saying that Linkedin was not prepared and did not have the proper protections lined up to protect its users. Security specialists also warn that more data could be breached as they try to decode the breach and determine the damage.
Linkedin is currently working with the FBI and forensics specialists to try to find the individuals that stole 6 million passwords and put them up on underground sites where hackers usually are found. While it is unknown if the hackers took any other information other than passwords, Linkedin has announced that they are doing a password “re-do”.
Analysts and other members of the industry have a more pessimistic view on the topic as they predict that the hackers took more than just passwords. These same individuals blame Linkedin for not notifying users that their password was stolen until days after the incident had happened.
This is a nightmare for Linkedin and quite frankly, they did a terrible job at protecting their users. This no doubt could spark some legal battles as users may end up suing Linkedin for not properly notifying them of their password being stolen.
Reputation is extremely important in the social networking industry. It appears the website might lose part of its rising reputation which is unfortunate. Some investors are speculating that Linkedin could see a sharp drop in users which could spell trouble for the future of the site.
Linkedin is currently down .68% to $95.61 on Monday morning. Linkedin debuted in May 2011 when its IPO was priced at $45 but the stock ended up doubling. Unfortunately, this rise has given the social networking site a very high valuation that may not be justifiable at this point. The company trades at a forward P/E of 80 (2013 earnings). If you look at peer, Google Inc (NASDAQ:GOOG), we see that the search company is trading at a forward P/E of 12 (2013 earnings).
The bottom line is that we still do not know the full effect of this security breach. We must wait until the authorities can go through and determine the damage before any real speculation can be considered.