Will Google or Facebook buy LinkedIn?

Social network for professionals is profitable and occupies an attractive niche

Shares of LinkedIn (NASDAQ: LNKD) soared nearly 18% Friday after the professional social networking company reported a 30% profit and more than doubled revenue for the fourth quarter.

LinkedIn shares reached as high as 89.84 Friday morning, up 17.7% from Thursday's closing price of 76.39.

The company's adjusted net income of $6.9 million, or 6 cents a share, was up 30% from last year's Q4 earnings of $5.3 million. Revenue was up 105% to $167.7 million from $81.7 million a year ago.

Analysts' average estimates called for non-GAAP earnings of 7 cents a share (LinkedIn reported 12 cents a share) on revenue of $160 million.

It's great that LinkedIn beat the Street, but does that warrant an 18% spike in share price? That bottom line looks good, but it's worth pointing out that LinkedIn deferred hiring in Q4, which kept down expenses. The company said it already has hired 200 new workers in the current quarter (the same as in Q4), with plans to hire more.

LinkedIn has three revenue streams: Recruiting services, which contributed $84.9 million, or slightly more than half of the total quarterly revenue; advertising ($49.5 million); and premium user accounts ($33.3 million). All three showed healthy growth (105%, 77% and 87%, respectively) in the fourth quarter.

But for all the coverage LinkedIn has received since going public last May, it's easy to forget how small the company actually is. Here's how LinkedIn's quarterly revenue stacks up to some other tech/social players:

LinkedIn: $167.7 million

Pandora: $75.0 million

Zynga: $306.8 million

Groupon: $506.5 million

Facebook: $1.13 billion

Google: $10.58 billion

While LinkedIn's revenue is more than twice that of Pandora Media, it's well short of Zynga's and Groupon's and is dwarfed by Google's and Facebook's.

LinkedIn's market capitalization is less than $1 billion -- even with Friday's double-digit boost, the company is worth only $875 million. Zynga's worth $1.33 billion, Groupon is worth $13.2 billion. Even Jive Software, whose IPO in mid-December was virtually overlooked, is valued by the market at slightly more than $1 billion.

The bottom line is that LinkedIn is a small, profitable company with a unique niche in a (currently) highly valued sector. That spells acquisition. I'd say the top candidates are Google and Facebook -- though there's a LinkedIn competitor called BranchOut built on top of the Facebook platform -- with maybe Yahoo as a long-shot.

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