LinkedIn Corp (LNKD) Appeals for Lawsuit Dismissal

LinkedIn Corp (LNKD) Appeals for Lawsuit Dismissal

Reportedly, LinkedIn Corp (LNKD) has petitioned in a California federal court for the dismissal of a lawsuit which alleged that the professional networking company had hacked into customers’ external email accounts.

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In Sep 2013, some U.S. members of LinkedIn filed the lawsuit in a federal court in San Jose, California, suing the company for hacking their external email accounts and collecting contacts’ addresses.

Moreover, the complaint stated that LinkedIn sent “endorsement emails” to the addresses without their consent. The lawsuit also requested the court to stop LinkedIn from violating data privacy and return any revenues generated from such actions.

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Dismissing all these allegations, LinkedIn stated that when users click on buttons labeled “allow” and “add connections” in the course of filling up details of their online contract, it enables the company to contact users’ addresses.

The current spate of allegations, if proven true, will hit LinkedIn’s reputation. In Jun 2012, the company was sued for breaching 6.5 million LinkedIn users’ passwords. However, it is worth noting that the company was acquitted in Mar 2013 and the class action lawsuit was dismissed.

It therefore appears that this is a similar case, very likely to go in LinkedIn’s favor.

LinkedIn, like Facebook (FB), stores a host of personal data in its servers and therefore, data security is a priority for these companies. Although these social and professional networking companies have a good policies and security measures against external threats, there is a lack of transparency when it comes to data utilization by the companies themselves.

Nonetheless, LinkedIn has good growth potential going by the positive outlook provided by management and remains a force in the professional networking space. Additionally, the company’s expansion in the mobile arena by launching apps for Apple’s (AAPL) iOS and Android operating systems is a positive.

However, competition from Facebook, which is also prepping its services to cater to business customers and professionals and a volatile macroeconomic environment, could pose headwinds for the company. Moreover, the emergence of companies likes ValueClick Inc. (VCLK), which has been introducing new services at regular intervals, could also bring about a rapid change in the scenario.

Currently, LinkedIn has a Zacks Rank #3 (Hold).

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