LinkedIn Confirms Hacking; Why Its Stock Is Teflon

By Julia Boorstin, CNBC Correspondent

NEW YORK ( CNBC) -- After a day of rumors and investigations, LinkedIn ( LNKD) has formally acknowledged that some of its users passwords have been "compromised."

This is the worst privacy and security news to slam the business networking service yet.

The company apologized and encouraged "best practices" to update passwords.

This is no small deal: by some reports it impacted over six million passwords, about 4 percent of LinkedIn's users. But still, LinkedIn's stock has been remarkably robust. At one point Wednesday it sank about 1.2%, but it closed the day up 9 cents, and it's up nearly 50% year-to-date. On Wednesday not a single analyst issued a note in response to the news or changed a rating or stock target.

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So why is the stock immune to a hack attack?

LinkedIn's built a strong reputation on these matters. The great effort LinkedIn has made to stay out of the spotlight on security and privacy concerns seems to have paid off. The company hasn't drawn the outrage and concerns that Facebook ( FB) has when it comes to privacy issues. This is partly due to LinkedIn's focus on business, rather than the personal photos and details people share on Facebook. By its very nature of enabling people to share their professional profiles, there is simply less risk.

I spoke to a number of Wall Street analysts who tell me they do not expect the news to at all impact LinkedIn usage. Why? These hack attacks and the need to change passwords are perceived as a cost of doing business in today's digital world. As long as "no one gets hurt," as one analyst put it, it's "not a big deal."

Perhaps most interesting, Wednesday's hacking news follows media storm over LinkedIn's mobile app violating personal privacy by improperly downloading and sharing personal details from users calendars, including conference call dial-ins and private notes. Users complained about the mobile app, and LinkedIn responded by changing its policy--it no longer downloads or shares the "notes" section of appointment reminders. When this news came out, the stock barely moved--ending the day less than a percentage point.

The company plans to update its privacy policy to give users more control sometime in the next few days. We'll hear when LinkedIn does its next quarterly report if there's been any impact on LinkedIn traffic. But Wall Street certainly thinks that users will take the news in stride; they'll change their password and perhaps click on through to connect with the service.

--Written by Julia Boorstin at CNBC
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