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Does Microsoft’s acquisition of LinkedIn make sense?


Microsoft Corp has agreed to buy LinkedIn Corp for a whooping US$26.6 billion i.e. US$ 196 per share. LinkedIn is undoubtedly the largest professional network in the World today with 433 million registered users but the company's share value that peaked to US$270 in 2015, has been trading around US$120 to 130 per share in recent times. Despite LinkedIn's popularity, it's business has been steadily unprofitable but on the contrary, it's sales have improved over the last year.

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Jeff Weiner will remain as LinkedIn’s CEO even after the acquisition that is subject to regulatory boards in the US and a few other countries. In addition, Jeff would make an entry into the Microsoft Leadership team. From LinkedIn’s point of view, this acquisition presents an opportunity for them to grow their revenue and stop the share price from dropping below.

For Microsoft, this is a bold move with clear intentions of making their products such as Microsoft Dynamics and Office365 more advanced. Microsoft might have just got what was needed for Microsoft Dynamics to overtake Salesforce. The opportunity of using Microsoft Dynamics CRM that works on top of LinkedIn’s social graph might make it tempting for enterprises to move to Microsoft Dynamics. After all, the World’s Largest Professional Cloud on Microsoft’s side and the World’s Largest Professional Network on LinkedIn’s side would give both companies the opportunity to create more creative, intelligent and productive experiences, as LinkedIn CEO Jeff pointed out. LinkedIn’s huge professional network would also give Microsoft the opportunity to use it as a sales channel.

Jeff Weiner will remain as LinkedIn's CEO even after the acquisition that is subject to regulatory boards in the US and a few other countries. In addition, Jeff would make an entry into the Microsoft Leadership team. From LinkedIn's point of view, this acquisition presents an opportunity for them to grow their revenue and stop the share price from dropping below.

In 2015, LinkedIn acquired Lynda.com for US$1.5 billion which was the fourth largest deal in the social media history at that time. LinkedIn spent big to increase the value of educational content that it offered to it’s users and Lynda operated as another revenue making channel for LinkedIn. Lynda provides an opportunity for Microsoft to use it for integration with Office365 and thereby recommend users the right course at the right time. This will certainly transform learning and enable individuals and companies to be more productive. Microsoft has named it ‘Just in Time Learning’.

Overall, Microsoft’s acquisition of LinkedIn looks like a ‘Just in Time Acquisition’ that totally makes sense as it provides both companies with the opportunity for advancement and growth, if integrations are seamless and successful. Satya Nadella and his team have made a sassy move that would pay them back positively in the short and long term.


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Deepak Selvan
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