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LinkedIn (LNKD - Analyst Report) has reportedly sued several unnamed individuals for data ‘scraping,’ a technique of extracting readable data from different sources through a computer program. The company has alleged that offenders are importing data from profiles of original users through fake profiles. These not only violate LinkedIn’s user agreement, but also federal and state computer fraud rules and regulations.  

As a preemptive measure, LinkedIn has disabled the fake accounts. Further investigation into the matter has revealed that the accounts were accessed through Amazon’s (AMZN - Analyst Report) Web Services cloud platform. Moreover, LinkedIn has reportedly asked Amazon to disclose the names of the alleged hackers.

LinkedIn stores a host of personal data on its servers and therefore, data security is a primary concern. These incidents of data hacking undermine the company’s creditability in protecting sensitive user data. LinkedIn’s services are being used by recruiters and job seekers alike and incidents like these smudge the company’s reputation.

Despite the best efforts by social and networking companies to incorporate strict user policies and security measures against external threats, hacking incidents like the current one occur now and then.

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

However, competition from Facebook (FB - Analyst Report), which is also prepping its services to cater to business customers and professionals, and a volatile macroeconomic environment could pose challenges for the company. The emergence of companies like ValueClick, 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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