Professional networking behemoth LinkedIn Corp (LNKD - Analyst Report) was reportedly sued for allegedly hacking into customers external email accounts. LinkedIn customers are required to give an external email ID as the username.
According to the lawsuit filed by some U.S. members of LinkedIn, in a federal court in San Jose, Calif., LinkedIn hacked their external email accounts and collected contacts’ addresses. Moreover, the complaint states that LinkedIn had 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.
However, LinkedIn has denied all the allegations and has maintained that full consent of the users had been taken before sending or contacting anyone from the acquired contacts.
LinkedIn, like Facebook (FB - Analyst Report), stores a host of personal data in its servers and data security is a priority for these companies. Although these social and professional networking companies have a strict policy and security measures against external threats, there is a lack of transparency when it comes to data utilization by the companies themselves.
The current spate of allegations, if proven true, will tarnish the company’s reputation. In Jun 2012, LinkedIn was sued for breaching 6.5 million LinkedIn users’ passwords. However, it is worth noting that the professional networking company was acquitted in Mar 2013 and the class action lawsuit was dismissed.
Thus, resolving the current issue is a priority for LinkedIn and stricter data usage guidelines should be initiated so that such occurrences are averted in the future. Moreover, with strong growth potential and the positive outlook provided by management, LinkedIn remains a force in the professional networking space.
Additionally, the company’s expansion in the mobile arena by launching apps for Apple’s (AAPL - Analyst Report) iOS and Google’s Android 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.
Currently, LinkedIn has a Zacks Rank #3 (Hold).