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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.