Microsoft to Acquire LinkedIn to the Tune of $26.2 Billion

Tech Business history is being made once more as Microsoft buys LinkedIn — and LinkedIn’s stock rose nearly 50%. Microsoft was known in the late 90’s and early aughts as that company that made the CEOs of DotCom startups millions. In its nearly 30 year history, Microsoft has acquired about 196 companies.

While that is an impressive number, Microsoft acquires companies much slower than one of its major competitors — Google. While Google has acquired 6 companies fewer than Microsoft, Google is almost 14 years younger.

In fact, when you break down the math, Google has snatched up nearly one company a week since 2010, compared to Microsoft’s 10–15 — a year. On the other hand, when Microsoft does make a purchase, people pay attention.

Microsoft and Apple two of the only prominent major tech companies to survive the Dot Com Burst. Sure, IBM, HP, and a few others are still around. But Apple and Microsoft are still two of three biggest players in the tech game (Google being the third), especially when it comes to inclusive companies — they make software, hardware, mobile, apps, everything.

So when Microsoft makes an acquisition, tech market analysts sit up straight. The company not only has a habit of making big bets — with mixed results.

Minecraft, the popular game was purchased in 2014 for $2.5 billion. In fact, Microsoft has a pretty storied history of buying gaming companies: Both Bungie and Lionhead Studios are big in the video game world — and both were bought up by Microsoft.

aQuantive, for $6.3 billion, in 2007;

Skype, for $8.5 billion, in 2011;

Nokia, for $7.8 billion in 2015;

Even going all the way back to the purchase of Hotmail in the late 90’s for $500 million (that was a lot back then!), Microsoft essentially throws a mountain of cash at whatever seems to have potential.

But out of those above lists, two of the biggest acquisitions have been written off as failures; both aQuantive and Nokia failed to meet Microsoft’s expectations. Skype is struggling, but neither is it booming. Minecraft is still popular but not exactly tearing up the internet like it once did.

That being said, Skype is doing well enough, Hotmail, while essentially legacied out now, gave them a dedicated user base in the millions. Bungie and Lionhead, while not exactly changing the world of gaming do well enough.

So all in all, Microsoft has a history of making big bets that don’t necessarily pay out — but they’re smaller bets seem to work out more often than not. After all, the company is still worth about $230 billion dollars and is considered by many to be one of the top 5 leading companies in the globe!

So what does this checkered history mean for Microsoft’s latest acquisition of LinkedIn? Mostly, only time will tell, but we can take a look at the what LinkedIn has to offer — and what Microsoft hopes to gain.

LinkedIn: Profile

LinkedIn is a well-known social networking site for professionals. It has 400 million users across as hundreds of industries — more importantly, over 25% of their users are active. Since it’s launch in late 2003, this platform has gone from an unknown entity to one of the most important tools in the kit of any professional.

Prior to the Microsoft acquisition, LinkedIn was worth about $135 a share (Microsoft paid over $190 a share by the way). The bad news for Microsoft is that LinkedIn has had a rough go of it for the past year or so. In fact, LinkedIn has actually had quite an awful few years, with dramatic fluctuations in their stock. Stock that dropped as low as 42% in the last year alone.

Microsoft’s Strategy

So if LinkedIn has been struggling, what does Microsoft hope to gain? Well, for one thing — access to those 400 million users and 106 MAU (monthly active users). Those are pretty astounding engagement numbers and well worth millions on its own.

This really all part of the Microsoft’s pivot away from their mobile division and to something new. Microsoft’s CEO Satya Nadella is pushing away from Nokia and other mobile failures that were the hallmark of Steve Ballmer’s last few years in office.

Microsoft’s new thrust? Enterprise tools for working professionals. This new strategy can be seen both internally and externally: A new emphasis on Office 365 and Dynamics has put Microsoft’s enterprise software at the forefront of the business. In addition to Microsoft buying LinkedIn, the tech giant also bought up Yammer (for 1.2 billion, by the way), another social media site for entrepreneurs.

So what does this all translate to? A new Microsoft, one whose bend is entirely for the working professional. None of the other major tech companies have made a significant move towards this relatively new form of networking. This could be good (low competition) or bad (no sustainability).

Noticeably, Microsoft’s stock dropped almost 5% when the news was received — but, as mentioned earlier, LinkedIn jumped by 47%. The takeaway of this whole Microsoft-LinkedIn news? Only time will tell.

About SDI

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