Microsoft Makes a Big Move Buying Linkedin for $26.2B
Microsoft recently announced that it will scoop up LinkedIn for $26.2 billion in the largest acquisition in its history, placing a bet that the professional social network can rivitalize the tech giant’s software offerings despite recent struggles by both companies.
Microsoft’s Chief Executive Satya Nadella is ponying up a hefty sum of cash for a firm that has suffered its fair share of setbacks. Although LinkedIn is the largest professional social network, with around 430m registered users and 100m visitors to its site each month, some analysts have questioned how much growth is left in its tank. While LinkedIn’s revenue growth has been slower than expected, if Microsoft’s CEO can make this deal worth the money and the effort, he could improve Microsoft’s questionable track record with acquisitions. So what potential challenges are standing in his way?
There are three major hurdles Microsoft will have to deal with:
Many analysts are questioning if the deal makes financial sense. Microsoft is spending the equivalent of approximately $260 for each monthly active user of LinkedIn. To keep shareholders content, it will need to grow LinkedIn’s user base amid concerns about slowing growth, or be more explicit on how Microsoft can capitalize financially from obtaining LinkedIn’s data.
Microsoft’s recent history of acquisitions leaves something to be desired. Its purchase of Skype in 2011 for $8.5 billion has not been as fruitful as once predicted. Microsoft squandered over $6.3 billion on aQuantive, an online-advertising firm that it bought in 2007, and $7.6 billion on Nokia’s handset business in 2014. Nadella, not at the helm when these acquisitions took place, is looking to steer the ship in a positive direction with the acquisition of LinkedIn.
A shift in workplace culture and behavior will be required. Nadella wants LinkedIn to become the go-to hub for news and other details about people’s professional lives, but firms are unlikely to want to give their employees more of an excuse to spend time on a social media site, regardless of its professional nature. It’s not uncommon for large firms to block or restrict access to LinkedIn on their networks, which might have something to do with executives fearing that recruiters scouring LinkedIn are out to poach their staff.
While many are questioning the purchase of LinkedIn, only time will tell if Nadella will be able to capitalize on Microsoft’s latest acquisition.
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