Earnings: How Might MSFT Purchase of LNKD Affect Membership?

There’s a lot on LinkedIn Corp LNKD's plate these days, but nothing bigger than its $26.2 billion sale to Microsoft Corporation MSFT, a $196 per share deal that is expected to close by the end of the year, pending approvals.

When LNKD turns in Q2 results after the bell Thursday, analysts say they want to know what the real story is behind salesforce.com, inc. CRM claim that it would have paid a “much higher” price and a different mix of cash and stock to acquire LNKD, according to a regulatory filing detailed in the Wall Street Journal. LNKD said the last offer from CRM came after it had inked an exclusivity pact with MSFT, and that the different mix of cash and stock didn’t exist.

Salesforce lost the bidding war, but the price MSFT is paying was upped by $5 billion, or 22%, according to the Wall Street Journal.

Beyond the acquisition, analysts say they want to know more about the business transition and strategy shifts that Chief Executive Jeff Weiner referred to during the Q1 conference call. What stage are they in and will the MSFT takeover change any of that? LNKD experienced a 19% jump in membership to 433 million users in Q1, Weiner said then. Has it grown in Q2? What are the social-networking site’s plans to step up membership and membership engagement, and better monetize its operations? Other initiatives such as redesigning member profiles, expanding mobile connectivity and strengthening job listings also are of interest, analysts say.

Thomson Reuters analysts have forecast per-share earnings of $0.78, up nearly 42% over the year-ago profit of $0.55 per share. Revenues are projected to leap 26% to $898 million from $712 million a year ago.

Short-term options traders have priced in a potential share price move of 2% in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform from TD Ameritrade.

There’s been some options trading activity in the monthly 190-strike puts. On the call side, there’s activity at the 195-strike and 200-strike lines. The implied volatility is at the 12th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.