Reading Into The Microsoft Acquisition of LinkedIn !

Microsoft buys LinkdIn

The software giant Microsoft yesterday announced its decision to buy LinkedIn, the world’s leading professional networking site, for $26.2 billion, or $196 per share, in cash. The acquisition which has already been approved by the boards of both the companies still needs to go through the regulatory approval process by LinkedIn shareholders and regulators.

The LinkedIn shares which had closed in at $131.08 on Friday climbed steeply by 47% to close in at $193 after the announcement while Microsoft stock went down by 3.2%. Jeff Weiner will continue to be the CEO of LinkedIn and report to the Microsoft CEO Satya Nadella.

“Little is expected to change,” said Weiner is a statement to his LinkedIn employees, adding that would continue to have the same titles and managers.

“The one exception: For those members of the team whose jobs are entirely focused on maintaining LinkedIn’s status as a publicly traded company, we’ll be helping you find your next play,” Weiner said. “In terms of everything else, it should be business as usual. We have the same mission and vision; we have the same culture and values; and I’m still the CEO of LinkedIn.”

Nadella couldn’t agree more!

“The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals,” he said. “Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the plane.”

What the deal means to LinkedIn?

Co-founded in 2003 by Reid Hoffman , Jean-Luc Vaillant , Allen Blue , Konstantin Guericke , Eric Ly , Lee Hower, LinkedIn today helps 433 million people in more than 200 countries hire, look for clients, forge business relations and connect with old professional contacts. Many of these users pay for premium services too.

Over the last one year, LinkedIn has been working aggressively to make itself more useful and engaging for its users. The most tangible steps taken by the team to consolidate and expand its user base are:

  • Revamping the newsfeed to deliver more relevant and valuable insights to members
  • A revamped, new look mobile app which has helped improve member engagement
  • Rolling out a better version of its Recruiter product to B2B customers
  • Acquiring, a leading online learning platform

Alltogether, these changes have helped the network register a 19% YOY growth. Their quarterly member page views have gone up by 34% and now touch 45 billion. Above all, they have registered a 101% growth in active job listings and got 7 million job listings last year.

LinkedIn which hit the peak last year when its shares were valued at $258 each might be down at present but it is placed amongst the best performing tech companies in the public arena. Though some parts of their business have stagnated, they are a growing business. Their core business today is recruitment related ads and subscription charges they levy for premium services. The former alone brought in $2 billion for LinkedIn in 2015 (out of its total revenue of $3 billion).

What the deal means to Microsoft?

On its part, Microsoft has not yet announced how it hopes to benefit from this acquisition.

Realizing that handheld devices now hold the key to engagement, Microsoft is now trying to go mobile. The Bing app was the first step in that direction and LinkedIn, with its huge mobile presence, is the next!

Also, Microsoft is now making an all-out effort to boost its social presence. It has failed till date to build up a networking presence worth the name for itself. It did try buying the popular chat (and also one of the fastest growing ones) app Slack earlier this year but the deal failed to make headway.

“LinkedIn is the ultimate business social platform. You have everybody on this, from interns and college students on up to the biggest CEOs,” suggests Ivan Feinseth, CIO at investment firm Tigress Financial Partners. “This is a good way for Microsoft to expand in social platforms.”

With LinkedIn in its pocket, Microsoft  might be able to out to put to some good use the  $1.2 billion spent by it on acquiring the business tool Yammer (which is a smaller, ‘closed version of LinkedIn) in 2012 as well.

The undisputed software giant has been rumoured to be sparing no efforts to buy With this acquisition, it will be in a better position to compete with the likes of the latter. Analysts believe Microsoft could still go on to clinch the Salesforce deal.

“Microsoft has the resources … the cash … the balance sheet … and the borrowing ability to acquire a lot more,” says Feinseth.

The huge LinkedIn network will give Microsoft a sales channel to boost its cloud network, particularly Office 365 and Dynamics while also complementing the tools it already offers to employers and employees.

The coming together of Office 365, Dynamics and LinkedIn in one place will help improve the LinkedIn newsfeed (which will then be able to serve articles based on the project you are working on) and make it all the more valuable for professionals.

This is expected to reflect in revenues which will now be catered through ‘individual and organisation subscriptions and targeted advertising.’

When BusinessInsider asked Nadella about the reasons behind the acquisition, he says,

“This is really all about expanding the opportunity we have, going beyond productivity and collaboration tools to having a professional network,” Nadella said. “It helps us differentiate our CRM product with social selling. It helps us take Dynamics (Microsoft’s suite of business management software) into new spaces like human capital management with recruiting, and learning, and talent management.”

Summing up, in the words of Rory Cellan-Jones, a technology correspondent, this deal is ‘about more than money!’

Microsoft is now beginning to assert itself as a cloud computing business which provides all B2B services that its clients might need- ‘including a social network to connect them to each other.’

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