Software oriented company Microsoft acquired professional social media company LinkedIn in all cash transaction for $26.2B, one of the biggest acquisitions by Microsoft. It is the second biggest tech acquisition in last 15years after Dell acquired EMC for worth $67B. Microsoft has gambled into hardware with gaming console Xbox, with a success but this acquisition is more software oriented. Microsoft tried to enter in the mobile world with the acquisition of Nokia, but didn’t work out really well. LinkedIn with no doubt is the market leader in professional marketplace. With the acquisition of LinkedIn, Microsoft has information of more than 400 Million LinkedIn users which Microsoft can use to make their products more business focused.
Is the acquisition worth $26.2B?
Share price of LinkedIn opened at $243.75 on 1st December 2015 and dropped drastically with value of$118.21 on 1st March 2016 with a drop of 48.49% in just three months. Microsoft acquire LinkedIn at a share price of $196, at a premium of 50% on last opened price. All in all by acquiring LinkedIn, Microsoft has acquired best data of professionals that includes education details, personal information, resumes, current company with destination, switched jobs etc. Microsoft can use the database to come up with new products and to improve all other products. For database of more than 400 million professionals, $26.8B is not a big amount. Microsoft has potential to grow with more software focussed products.
Future benefit to Microsoft:
LinkedIn being the most genuine data source of millions of professionals. Microsoft can make revenue with their formal project of Bing Ads, which provides pay-per-click advertising on Bing and Yahoo! Search engine. More organised and authentic database of professionals will help Microsoft to target the Ads in a better way.
Microsoft can make a combined platform for professionals which can use Skype and LinkedIn together, helping them to organise a web portal that will be more influential in the corporate world. This will help to bring professionals closer.
Acquisition of LinkedIn by Microsoft is another example to acquire segment leader from 196 acquisitions of Microsoft. Microsoft acquired telecommunication segment leader Skype, mobile phone segment leader Nokia, social networking communication segment leader Yammer. It’s a great move by Microsoft to be a leader in enterprise.
LinkedIn was the segment leader in professional social media and acquisition by Microsoft adds more resources to improve further. Furthermore, linking of LinkedIn profile with Microsoft products like Office, Outlook, Skype and Windows which is used by number of professionals will help to make LinkedIn profile as an identity for professionals.
Even after acquiring the segment leader LinkedIn, there is no significant change in the share price of acquirer company Microsoft. This normal trend is seen by many researches that the share price of acquired company increases and that of acquirer company decreases. However, share price of Microsoft did not decrease significantly, which clearly depicts good hold of Microsoft in the marketplace. Acquisition opens the opportunities for Microsoft and adds more potential to come up with new products and to define a new workplace.
Is collaboration of Microsoft and LinkedIn a good idea?
Acquisition of LinkedIn by Microsoft will result in linking of social platform with Microsoft products. There will be a risk factor for many Microsoft users using its product for business purposes. This arises the question of privacy and risk related to business data. Security of data will deviate many Microsoft users to move to Open-Source platform. As a result, users in business world will deviate to Linux based OS from Microsoft Windows. It seems that Microsoft will enhance the customer usability on the cost of user’s data.
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