Microsoft Buying LinkedIn For $26.2 Billion - InformationWeek

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Microsoft Buying LinkedIn For $26.2 Billion

The deal is Microsoft's largest acquisition yet. It's aimed at transforming the company's productivity tools and communications efforts.

Google Apps Vs. Office 365: Which Suite Reigns Supreme?
Google Apps Vs. Office 365: Which Suite Reigns Supreme?
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Microsoft, in a surprise move Monday, announced plans to acquire LinkedIn in a $26.2 billion deal that aims to reinvent Redmond's productivity tools and communication tools efforts.

Under the deal, which is expected to close by the end of the year, Microsoft will operate the social media networking behemoth as an independent operation that will retain its name, its current CEO Jeff Weiner, and its company culture. While Weiner will have the ability to decide which specific aspects of LinkedIn and Microsoft to integrate, he will be partnering with Microsoft's Office 365 and its CRM and ERP Microsoft Dynamics teams on various products that can be integrated.

In a video interview posted within Microsoft's announcement, Microsoft CEO Satya Nadella explained the reasoning behind what would seem on the surface an unusual acquisition with few cross-benefits to the companies:

I'm a deep believer in productivity tools and communication tools, because that is what empowers people to be great at their job. But think about taking that and connecting that with a professional network and really having the entirety of what is your professional life be enhanced, more empowered, where you are acquiring new skills and being more successful in your current job and finding a greater, big, next job.

That's the vision and I've been talking with [LinkedIn cofounder and chairman Reid Hoffman] and Jeff for a while. The fact that it came together now is fantastic, but believe me, I've been thinking about this for a long time.

In his letter to employees, Nadella noted that when he considers an acquisition, he looks for whether it will expand Microsoft's opportunity and addressable market, whether the target company is "riding secular usage and technology trends," and whether it's aligned with the Redmond giant's core business and sense of purpose.

From left: LinkedIn CEO Jeff Weiner, Microsoft CEO Satya Nadella, LinkedIn cofounder and board chairman Reid Hoffman

(Image: Microsoft)

From left: LinkedIn CEO Jeff Weiner, Microsoft CEO Satya Nadella, LinkedIn cofounder and board chairman Reid Hoffman

(Image: Microsoft)

The LinkedIn deal came back affirmative on these counts, making it the largest buyout deal Nadella has orchestrated since becoming Microsoft's CEO in 2014. It also marks the largest acquisition Microsoft has done in its history, according to GeekWire.

"This deal is key to our bold ambition to reinvent productivity and business processes," Nadella wrote in his letter to employees. He pointed to potential examples, such as having a LinkedIn newsfeed that delivers articles based on a project a user is working on also allowing Office 365 to suggest an expert to connect with via LinkedIn for assistance.

"As these experiences get more intelligent and delightful, the LinkedIn and Office 365 engagement will grow. And, in turn, new opportunities will be created for monetization through individual and organization subscriptions and targeted advertising," said Nadella.

During the conference call on the merger, Nadella cited other examples, such as Microsoft's calendar and project features sharing information with LinkedIn's newsfeed to "drive relevance and ad targeting."

He also envisions Microsoft's digital assistant Cortana accessing the LinkedIn network to help users prep for upcoming business meetings by providing the user with more information about the people they will be meeting with.

LinkedIn's Weiner noted during the conference call that both Microsoft and LinkedIn are aligned and excited by users' desire for continuous learning. He noted that LinkedIn's Lynda.com learning site can teach users about different Microsoft applications. He pointed out that six of the top twenty-five courses on Lynda deal with mastering Microsoft software.

One analyst, Jack Gold of J. Gold Associates, said via an email to the media that the massive buyout makes sense:

LinkedIn is highly complementary to Microsoft's Skype for Business, Yammer, and other such enterprise focused services. Its subscriber base is primarily business people, not consumers. And its users tend to be older and more focused, with spending power.

Conversely, Microsoft could use its analytics tools on LinkedIn to give the company insight into what business users are doing on the Internet and the ways they are using various tools and products. That type of insight, in turn, could tell the Redmond giant what products to deploy and how to deploy them in the future, Gold said.

[Read LinkedIn Hack: Why Breach Is a Wake-up Call for Users.]

Adding a layer that integrates the potential sale of enterprise software subscriptions onto its social media network business will undoubtedly pose some challenges for LinkedIn. But LinkedIn's Weiner says he already knows he faces a large task ahead.

"Satya has said time and time again, 'You guys have to help write the rules. You are going to do this differently. You're going to have your independence. We have the shared sense of alignment, so let's dream big, let's think about what's possible,'" Weiner said in the video posted to Microsoft's website.

[Editor's note: This article has been updated to include more of the information Nadella provided in the conference call mentioned.]

LinkedIn is highly complementary to Microsoft’s Skype for Business, Yammer, and other such enterprise focused services. 

Dawn Kawamoto is an Associate Editor for Dark Reading, where she covers cybersecurity news and trends. She is an award-winning journalist who has written and edited technology, management, leadership, career, finance, and innovation stories for such publications as CNET's ... View Full Bio

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jastroff
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jastroff,
User Rank: Ninja
6/18/2016 | 10:40:23 AM
Linked In Had a Very Good Business Model
Linked In essentially bet the store on getting enough professionals to sign up for their service, while leveraging these "free" memberships to companies and recruiters who wanted talent. How's that for smart? It did really pay off for them as they grew and grew. 

Here are some data points:

- About 60% of Linked In revenue is from talent solutions services – that is,  looking for people to hire by selling services to employers, companies and professional recruiters. Companies pay for enhanced search, access to candidates, branding.

- Also, advertising by companies accounts for a revenue stream of approx. 20%.

- LI leveraged the registration of professionals very well – approximately 80%  of these estimated 300 million registrations are still free.

- The paid consumer model was never the driver for LI revenue, It was the corporate/recruiter sell. Advertising has taken off as well.

I worked with HR professionals as a consultant, and they saw this as an answer to their problems if the user base was big enough. And it got big enough blue chip and many other companies worldwide to really hook their wagons to LI and pay for it.
jastroff
50%
50%
jastroff,
User Rank: Ninja
6/17/2016 | 6:21:34 PM
Re: Well done MSFT
Do you think Linked In does a good job for "personal branding" if people are all represented by one template? I don't know, I'm asking -- 

 
Technocrati
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50%
Technocrati,
User Rank: Ninja
6/17/2016 | 3:45:09 PM
Re: Well done MSFT

@jastroff   Excellent points.   The mud always gets deep when one really looks at MSFT.  I am literally tired of this company and it's self induced righteousness. 

TerryB
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50%
TerryB,
User Rank: Ninja
6/14/2016 | 1:05:01 PM
Re: Well done MSFT
You mean like the frontline sales guys, a sort of more indepth business card? I'm struggling to believe a company wants to advertise their key technical guys to other companies to poach.

Would you say this branding more true for service companies, where people are really the product? Or do think that applies to mfg companies that make products we buy?

But I think I see where you are coming from in service. If your business is painting houses, you could certainly advertise talents/experience of your painters. Same with IT service industry, for sure. But sure seems like your competitors would then have a source to steal your employees they might want. They certainly be able to reach out to them without paying headhunters like the old days.
vnewman2
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vnewman2,
User Rank: Ninja
6/14/2016 | 12:56:05 PM
Re: Well done MSFT
I think the "personal branding" of the individual people that make up the business is what is alluring about LinkedIn.  Marketing no longer focuses on promoting the company alone, this shift is showcasing the individuals and what they can bring to the table as a representative of the company - and that's where LinkedIn comes in.
TerryB
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50%
TerryB,
User Rank: Ninja
6/14/2016 | 12:50:24 PM
Re: Well done MSFT
I wonder if "business" cares one bit about LinkedIn, as far as tool to improve their bottom line? Business PEOPLE like it because it helps them network to find another job if they need/have to. Other than acting as an online reference for HR when evaluating perspective hires (which I would take with grain of salt anyway, like anything internet based), what else does it do that helps the "business" of a company?

Or do people use this as a poor man's CRM, a way to keep in touch with your supply chain?

Like most of these type things (Facebook, Twitter, etc), I'm always fuzzy how they generate cash/profit anyway, other than digital ads. I hope this doesn't lead to MS Office or Windows having ads in it. :-)
jastroff
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0%
jastroff,
User Rank: Ninja
6/14/2016 | 10:08:35 AM
Re: Well done MSFT
@technorati -- all good points, but consider...

- lowering the price of anything is a different business decision than buying companies. But it would be nice to see more affordable good from them.

- MSFT has $92 billion in free cash with which to buy companies, most of the money is off shore in tax havens

- MSFT borrowed to buy Linked In to keep the lower tax rate on the payment favorable and not dip into its capital

They paid a 50% premimum on the Linked In share, so you can argued they overpaid
Joe Stanganelli
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50%
Joe Stanganelli,
User Rank: Author
6/14/2016 | 6:30:25 AM
Re: Well done MSFT
The important thing is that -- unlike, say, a company like Yahoo -- they didn't ruin Skype and they were still able to integrate rate it reasonably well into their portfolio of existing products while letting the acquisition maintain its functionality and identity. I suspect that will be the case here, too.
Technocrati
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0%
Technocrati,
User Rank: Ninja
6/13/2016 | 7:24:02 PM
Re: Well done MSFT

@jastroff    I agree.  I am not excited about this at all. The proof is in the execution and most of us know how well MSFT is at that. 

In another tread I am arguing that MSFT can't seem to lower the price of a Surface but can somehow come up with billions to buy a social network ?    

 

That's what I find interesting.

jastroff
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50%
jastroff,
User Rank: Ninja
6/13/2016 | 3:57:39 PM
Re: Well done MSFT
@vnewman2 -- Agree, it will be interesting. But MSFT tends to blunder into things and do nothing special with them (Skype), and I have less hope they will make it all work as an integrated whole. And I expect downtime and updates from Linked In now, sadly.

But, if they do make it work, it could be a viable (if somewhat large) enterprise and SMB social and office system. 
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