LinkedIn to Face Lawsuit for Accessing Users' External E-mail (Revised) - Analyst Blog


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As per Bloomberg, LinkedIn Corp ( LNKD ) may face a lawsuit for accessing customers' external e-mail accounts and their contacts' addresses for marketing purposes. LinkedIn customers are required to give an external email ID as their username.

This follows the opinion of U.S. District Judge Lucy H. Koh that frequent invitation emails "could injure users' reputations" and lead their contacts to consider these emails as spam. Aggrieved users had requested U.S. District Judge Lucy H. Koh to stop LinkedIn from violating their privacy and return any revenues generated from such actions. The complaint stated that LinkedIn used these IDs to send 'endorsement emails' to contacts of its users, without their consent. So affected users can now pursue the case to claim damages from LinkedIn. .

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, the company was acquitted in Mar 2013 and the class action lawsuit dismissed.

It is worth noting that till now LinkedIn has denied all the allegations and stated that it had acquired the consent of its users while sending or contacting anyone from the acquired contacts. It therefore appears that this case is quite similar to the previous one and therefore 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. Despite the best efforts by social and networking companies to incorporate strict user policies and security measures against external threats, incidents of hacking are recurrent.

Thus, resolving the current issue is a priority for LinkedIn. Stricter data usage guidelines should be initiated so that such occurrences are averted in the future. Moreover, with strong growth potential and a positive outlook provided by management, LinkedIn remains a force to reckon with in the professional networking space.

Additionally, the company's expansion in the mobile arena by launching apps for Apple 's ( AAPL ) iOS and Google 's ( GOOGL ) Android operating systems is a positive.

Nonetheless, continued investments to provide new and improved products and services might affect its profitability. Though impacting LinkedIn's operational performance in the short run, these investments are necessary for member growth and user engagement over the long term. We remain encouraged by the sturdy top-line growth recorded in the past few quarters.

LinkedIn thus remains a pioneer and a leading professional networking company with a wide industry reach. This enables it to explore and tap into every opportunity to connect the global workforce.

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

(We are reissuing this article to correct a mistake. The original article, issued Friday, June 13, 2014, should no longer be relied upon.)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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