Microsoft said earlier yesterday that it was buying the professional social network LinkedIn for $26.2 billion in cash, a move that helps refocus the US tech giant around cloud computing and services.
With its biggest-ever acquisition and one of the largest in the tech sector, Microsoft takes a big step into the world of social networking and adds a new tool for its efforts to boost services for business.
“This deal brings together the world´s leading professional cloud with the world´s leading professional network,” Microsoft chief executive Satya Nadella said in a statement.
“It´s clear to me that the LinkedIn team has grown a fantastic business and an impressive network of more than 433 million professionals.”
According to a statement from the two firms, LinkedIn “will retain its distinct brand, culture and independence,” with Jeff Weiner remaining at CEO of LinkedIn.
“Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn´s network, now gives us a chance to also change the way the world works,” Weiner said.
The two firms said they had reached a “definitive” agreement that would close later this year, with the support of LinkedIn chairman and controlling shareholder Reid Hoffman.
The move comes with Microsoft moving away from being a pure software firm, and LinkedIn seeking ways to boost growth.
LinkedIn, which enables members to connect with similar-minded professionals and facilitates recruiting and job hunting, has carved out a social network with a distinct identity.
But LinkedIn in the past quarter reported a loss of $46 million and a $166 million loss for 2015, which let its shares at multiyear lows early this year.
Nadella, in an email to staff, said the deal reflects Microsoft´s new focus on the enterprise and cloud.
“We are in pursuit of a common mission centered on empowering people and organizations,” he said.
He added that the deal “is key to our bold ambition to reinvent productivity and business processes. Think about it: How people find jobs, build skills, sell, market and get work done and ultimately find success requires a connected professional world.”
LinkedIn, which calls itself “the world´s largest and most valuable professional network,” has been seeking to expand its offerings with more messaging, mobile applications and revamped its “newsfeed” to help boost engagement.
“Today is a re-founding moment for LinkedIn,” Hoffman said in the statement. “I see incredible opportunity for our members and customers and look forward to supporting this new and combined business.” Microsoft said it would finance the deal mostly by issuing new debt.
Clever, or too late?
Benedict Evans, a member of the Andreessen Horowitz venture capital firm who blogs on technology, said in a tweet that deal appear to be future-looking.
“Very clever and oblique MSFT thinking — how will we communicate, share & connect in a decade? Not docs + email. Social graph is key,” Evans said in a Tweeted referencing the company´s Wall Street trading symbol.
But Roger Kay, analyst and consultant with Endpoint Technologies Associates, said it was doubtful that Microsoft can use the deal to compete in the world of social networking dominated by Facebook.
“It doesn´t help at all competing with Facebook,” Kay told AFP. “LinkedIn is not in the same league as Facebook.” Kay said Microsoft, paying a premium of some 50 percent for LinkedIn, is likely to end up writing down much of the investment. “It seems extraordinarily expensive,” he said.
“I´m going to make the prediction they will write this down. There is no way they can extract $26 billion from LinkedIn.” (APP)
