Microsoft’s $26 bn LinkedIn deal raises questions

Microsoft and LinkedIn deal
Microsoft’s $26.2 billion cash deal to acquire professional networking website LinkedIn is offering many surprises to the global software industry and analysts.

In a presentation announcing the deal, Redmond, Washington-based Microsoft outlined a vision in which a person’s LinkedIn profile resides at the middle of other pieces of their work life, connecting with Windows, Outlook, Excel, PowerPoint, Skype and other Microsoft products.


LinkedIn has nearly 10% of its over 430 million users in India
Microsoft to accelerate growth of LinkedIn, as well as Microsoft Office 365 and Dynamics
LinkedIn will have more funds for growth
LinkedIn can utilize all Microsoft platforms for visibility
Microsoft can utilize 430 million LinkedIn users for its own business promotion
LinkedIn to operate independently, like Facebook’s WhatsApp or Google’s YouTube


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Less clarity on the strategy behind the acquisition
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Will Microsoft rivals work with LinkedIn?

The news brought cheers for LinkedIn as shares jumped 48 percent to $194.35 in pre-market trading on Monday.

Microsoft shares fell 2.9 percent indicating that traders are not accepting the cash deal. The deal works out to over $60 per LinkedIn user.

Analyst comments

“The news has actually surprised me. We have yet to see how this will bring in revenue for Microsoft other than acquiring a popular brand. Also, we have to wait for its repercussions in India where LinkedIn is gradually growing,” Vishal Tripathi, research director at global market consultancy firm Gartner, told IANS.

“Microsoft could build LinkedIn into a major customer relationship management software system for salespeople, pushing into an area dominated by,” said Anurag Rana, a senior analyst for Bloomberg Intelligence.

“I would expect Microsoft to exploit this opportunity by bringing its brand and offerings closer to professionals connected via LinkedIn through the power of social networking, which is bound to translate into additional sales revenues in the years to come,” said Sanjoy Sen, doctoral research scholar, Aston Business School, UK.

Mark Skilton, professor at Warwick Business School, said the acquisition made sense in respect of Microsoft’s link with enterprise in its cloud platform and portfolio of business services, and added it will help the global software giant to build out its enterprise services capabilities.

Skilton said LinkedIn makes two thirds of its income from talent solutions in recruiting and job market services that define it and the remainder in selling marketing solutions and premium subscriptions.

The Mountain View, California-based LinkedIn recently opened its largest office in Asia in Bengaluru that can house over 800 employees. The company currently has nearly 650 employees in India, IANS reports.

LinkedIn did not have an answer when it was hit by a massive data breach that put nearly 167 million users’ passwords and personal information in the hands of hackers four years back. LinkedIn recently came out with an explanation and steps it has taken to protect users.

LinkedIn recently launched a new version of its mobile app that has led to increased member engagement and enhanced the LinkedIn news feed to deliver better business insights. It acquired an online learning platform to enter a new market and rolled out a new version of its Recruiter product to its enterprise customers.

For Microsoft, LinkedIn will be largest acquisition in the technology space. Microsoft’s main acquisitions were Skype, Nokia phone business, aQuantive Inc and Mojang AB.

Baburajan K