Why Would Microsoft Buy LinkedIn For A Whopping 27 Billion

Microsoft Buys LinkedIn for a Whopping $27 Billion

Microsoft Buys Linkedin 27 Billion

Microsoft Buys Linkedin 27 Billion

Acquisition deals are common in business. But when the cost of acquisition is as much as $26.2 billion in cash for a social network, the deal certainly demands attention – mostly from entrepreneurs. Microsoft has announced that it’s going to acquire LinkedIn, an established professional network.

The acquisition deal (196th as per Wikipedia) that’s projected to conclude this calendar year will value LinkedIn shares at $196 each.

An important term of the acquisition process is that LinkedIn will have the freedom of retaining its own brand and culture and the it will function under the existing CEO Jeff Weiner. And Jeff will report directly to Microsoft CEO Satya Nadella. It’s important to know that the LinkedIn deal is the largest in the history of Microsoft. Other Microsoft recent acquisitions include Yammer ($1.2 billion), Mojang ($2.5 billion), Nokia ($7.2 billion) and Skype ($8.5 billion).

Microsoft’s success record in acquiring large companies is mixed. Back in 1997, Microsoft acquired Hotmail, a free email service, for $400 million. The deal resulted in an increased number of email subscribers and web traffic. In addition to that, the integration of Microsoft web apps like Windows Live Messenger and SkyDrive provided users with a unique experience. Recently, the Skype deal turned out to be a success. The Nokia deal fell flat. However, under Nadella, the company has witnessed more success with smaller acquisitions.

Microsoft hasn’t said anything about how exactly it will leverage LinkedIn. But it’s easy to imagine that the software giant will use the business networking platform to boost its own social networking presence.

Currently, LinkedIn has over 433 million users who use the platform to find jobs and connect with colleagues and professionals from all across the globe. Many of these users are also subscribers to the premium services offered by LinkedIn. The professional networking platform has been reported to generate $2.99 billion in revenue for 2015, which is a 35% increase from 2014.

“The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals,” Nadella 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 planet.”

It’s obvious that the deal is a big one both in terms of the cash being paid and what LinkedIn brings to the table.

Since Nadella took over as Microsoft CEO, he has done a great deal to improve the performance and the image of Microsoft. In the technology industry itself, the company has moved ahead by partnering with companies like Salesforce.com, which was a tech rival at one time. Further, Nadella expanded the company’s ambit from traditional software to cloud applications. Under Nadella’s leadership, Microsoft’s stock has gone up considerably.

Microsoft’s acquisition of LinkedIn is an act of bringing two perspectives together – professional cloud and professional network.

Weiner said, “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.”

It will be interesting to see though how Microsoft generates revenues from its acquisition of LinkedIn. Experts suggest that the company will use ‘LinkedIn data’ to pick up sensitive information about potential customers to increase revenues. By connecting LinkedIn directly to Microsoft Office, Microsoft could also make it easy for attendees of meeting learn from one another through direct invitations in their calendars. The LinkedIn algorithm that crunches data is of immense interest to Microsoft too.

Microsoft has attempted to gain ground in the social networking industry, but to no avail. In the year 2012, it acquired Yammer, a social networking service for private communication within organizations. But it’s hopes of turning this social networking deal into a huge success didn’t materialize. Nadella now hopes to fulfill this dream with his LinkedIn deal. However, one may ask why Microsoft didn’t venture into developing its very own social network instead of spending as much as $26.2 billion on acquiring one. Can’t Microsoft do just that?

My guess is that just like in the HOTMAIL deal Microsoft wants the LinkedIn users more than anything. If they created another social network they would still be fighting LinkedIn on top of all the networks for attention. This way they knock off a Major competitor and Microsoft is immediately a Dominant player in the social space. Of course they have a bunch of new half “customers” now to easily sell their wares too as well. The price tag was steep but in the future we will look back at the headline ” Microsoft Buys Linkedin” and say the move was brilliant.

About the Author Kevin

Kevin Latmore is as a record breaking $7Figure Network Marketing Success Story. Some Call him a marketing guru. He's coached over 100K people in 65 countries and sold over $100M worth of goods / services. Kevin is now a highly sought after MLM Consultant, Public Speaker and Elite Business Coach.

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