What's at Stake in the $26.2 Billion Microsoft-LinkedIn Buyout

 
 
By Don Reisinger  |  Posted 2016-06-15
 
 
 
 
 
 
 
 
 
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    What's at Stake in the $26.2 Billion Microsoft-LinkedIn Buyout
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    What's at Stake in the $26.2 Billion Microsoft-LinkedIn Buyout

    In an unexpected move, Microsoft announced its intent to buy LinkedIn for $26.2 billion, and here's a look at what both companies could get out of it.
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    A Look at the Valuation
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    A Look at the Valuation

    Microsoft paid a heavy premium for LinkedIn. The social network's shares closed June 10 at $131.08. However, Microsoft announced on June 13 that it would pay $196 per share in its all-cash deal to buy out LinkedIn, representing a 50 percent premium on the company's earlier share price and billions more than it was valued when the stock closed on June 10. Microsoft must have high hopes for LinkedIn.
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    Here's What Satya Nadella Says
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    Here's What Satya Nadella Says

    It's abundantly clear in all of the statements Microsoft CEO Satya Nadella made on June 13 that he sees a mutually beneficial partnership with LinkedIn. He noted that he believes Microsoft can help LinkedIn grow its user community more rapidly, while complementing the services his company already offers. In fact, he said that LinkedIn could become a core component in several Microsoft products.
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    What LinkedIn Users Can Expect
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    What LinkedIn Users Can Expect

    For now, LinkedIn users shouldn't expect any changes to the way they use the social network. In fact, LinkedIn CEO Jeff Weiner said that the acquisition would only help his company do a better job of linking professionals around the world. So at least for now, don't expect any major changes in how LinkedIn's social network operates.
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    What Microsoft Customers Can Expect
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    What Microsoft Customers Can Expect

    Microsoft customers, however, can expect some changes in the coming months. Nadella has already said that he envisions LinkedIn being integrated across Office 365 and other cloud and application platforms, including Microsoft's Dynamics CRM platform.
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    Weiner Tells LinkedIn Employees the Deal Is Positive for Them
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    Weiner Tells LinkedIn Employees the Deal Is Positive for Them

    In an email to employees, Weiner seemed overjoyed by the possibility of joining Microsoft. He said that he believes the move will help LinkedIn reach a new level in the social-networking market. He also said that employees shouldn't be worried about the move and that he's pleased he will report directly to Nadella.
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    LinkedIn Could Be Baked Into Windows
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    LinkedIn Could Be Baked Into Windows

    Weiner also shared a bit more detail about what Microsoft might have planned for LinkedIn. Aside from Office 365 and Dynamics, Weiner hinted that it's possible that LinkedIn will be baked into Windows itself. He added the service could also be integrated into Cortana, Microsoft's virtual personal assistant, as well as Calendar, Skype and even Active Directory.
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    Lynda Gets Some Learning Love
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    Lynda Gets Some Learning Love

    Lynda, LinkedIn's self-teaching service, was also a factor in Microsoft's purchase decision. In fact, Weiner said in his note that he believes the Microsoft acquisition will allow LinkedIn to accelerate Lynda's adoption and add its features directly into Office. He's a firm believer—like Nadella—that Lynda has value and can be a useful learning tool in Microsoft's many apps.
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    There's the Advertising Play
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    There's the Advertising Play

    Advertising is another potential revenue stream for Microsoft. Weiner hinted at this prospect by saying that LinkedIn Sponsored Content customers might be able to show their ads across the Microsoft ecosystem. In addition, Weiner believes LinkedIn will now be able to sell more ads by offering plans that would showcase marketing materials across LinkedIn and Microsoft services.
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    An Eye on LinkedIn's Future
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    An Eye on LinkedIn's Future

    So, what's in store for LinkedIn? For now, the company will remain independent and will not be integrated into any Microsoft divisions. So far the company says it will only lay off those who are handling LinkedIn's regulatory compliance requirements as a publicly traded company. However, acquisitions can always result in substantial layoffs at a target company once management identifies ways to reduce management redundancies, streamline operations or boost profitability.
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    It's Really an All-Enterprise Move
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    It's Really an All-Enterprise Move

    Analyzing all of the statements made by both companies and their chief executives reveals that Microsoft's decision was designed to appeal to enterprise customers. LinkedIn wants to tap into Microsoft's enterprise users across its many services to grow its user community. Microsoft wants to use LinkedIn's users to attract new customers to its cloud offerings. Rank and file LinkedIn users could benefit in terms of closer integration with Microsoft applications and operating systems. But the real focus will be on users' statuses as professionals who are likely to use a wide range of software tools and cloud services.
 

Microsoft shook up the social media market with its surprise announcement on June 13 that it has entered into an agreement to purchase the professional social network LinkedIn for $26.2 billion, inclusive of LinkedIn's net cash. If Microsoft closes the deal as expected by the end of the year, it will immediately become a powerful presence in the social-networking market while potentially helping the company connect to more enterprise customers. Microsoft believes it can gain a profitable new revenue stream from increased sales of its cloud applications and services. For LinkedIn, the deal means continuing to operate independently as a part of Microsoft and, according to CEO Jeff Weiner, gaining the resources to compete on the same "scale" as technology titans, like Apple and Google. The move, in other words, is an opportunity to help both companies. This slide show delves deeper into the acquisition and why the companies firmly believe it's a smart move for both organizations. It also suggests reasons why Microsoft decided it needed to own a social network and why LinkedIn feels it needs Microsoft's help to succeed.

 
 
 
 
 
Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis' Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.
 
 
 
 
 
 

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