Microsoft to buy networking site LinkedIn for $26.2 billion


14 June, 2016

There is no doubt that Microsoft can afford to buy LinkedIn.

Richard Windsor, analyst at Edison Investment Research said the value of the deal will depend on whether Microsoft can successfully marry the LinkedIn website with its existing software. The Standard & Poor's 500 index fell 17.01 points, or 0.8 percent, to 2,079.06 and the Nasdaq composite fell 46.11 points, or 0.9 percent, to 4,848.44. Nadella expects that the acquisition will open new vistas in the horizon for Microsoft's Office suite and LinkedIn while the revenues and competitive position of both the companies would get a shot in the arm from the downside they were experiencing till date. We have yet to see how this will bring in revenue for Microsoft other than acquiring a popular brand.

At the price, the Redmond, Wash.-based software giant is paying $196 per share for the company, a 49 per cent premium, compared to its Friday closing price, CBC reports.

"The LinkedIn team has grown a fantastic business centered on connecting the world's professionals", said Satya Nadella, chief executive officer of Microsoft.

"Along with the new growth in our Office 365 commercial and Dynamics businesses this deal is key to our bold ambition to reinvent productivity and business processes".

In another statement, S&P said it has placed its unsolicited ratings on LinkedIn Corp on "CreditWatch with positive implications".

In fact, it is Microsoft's largest ever acquisition - and over the years it has bought quite a few other companies.

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"It's really the coming together of the professional cloud and the professional network", Mr. Nadella said in an interview on Monday. Jeremy Waite, EMEA head of digital strategy at Salesforce, muses on this and argues that while Facebook has a "social graph", to track connections between friendship groups and Twitter has an "interest graph" to see affinity between different profiles, LinkedIn has the economic graph: "When you realise how powerful it actually is, you could nearly view it was LinkedIn's secret weapon".

In the long term, Microsoft would aim to use LinkedIn to build engagement with Office 365, opening the door for more diverse forms of monetisation via subscription services and targeted advertising. But I'm not quite so sure about the hefty price paid.

"Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn's network, now gives us a chance to also change the way the world works", Weiner added. LinkedIn recently came out with an explanation and steps it has taken to protect users.

Linkedin has seen its global membership grow by just under a fifth year-on-year to 433 million, while the number of active job listings on the site has climbed 101% year-on-year to more than seven million.

Microsoft and LinkedIn's points of reference.

According to a press release, the transaction - which is expected to close this calendar year - has been unanimously approved by the boards of directors of both LinkedIn and Microsoft.

iPhone and Android steam-rolled on, and in 2015 Microsoft wrote off $US7.6 billion in costs related to the deal and laid off 7800 (mostly ex-Nokia) staff. In May this year, it recouped a paltry $US350 million by onselling part of its phone business to Taiwan's Foxconn. Office was a prominent character in Nadella's email to employees, though whether this means LinkedIn will be incorporated into Office proposition has not been stated. And that's a good thing to know for LNKD stock investors.

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