This follows a distinct pattern with Microsoft to essentially try and bolster select products by continually adding new elements, increasingly now through acquisitions rather than developing them in-house.
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Why has Microsoft acquired the network however?
Citing “people familiar with the matter”, Bloomberg describes the cloud services company as “a potential rival bidder for LinkedIn…in the process leading up to the professional networking website’s acquisition by Microsoft”.
In Microsoft’s case, these seem created to encourage Mr Nadella to behave as if he’s running an Apple or a Facebook – tech companies that are at the forefront of consumer innovation.
The San Francisco-based software-as-a-service vendor was interested in LinkedIn primarily for its recruiting business, Salesforce CEO Marc Benioff told Recode on Thursday.
When it announced the deal, Microsoft outlined a vision in which a person’s LinkedIn profile resides at the middle of other pieces of their work life, connecting with Windows, Outlook, Skype, Office productivity tools like Excel and PowerPoint, and other Microsoft products.
However, if we delve deeper, the acquisition is likely to open up new vistas for LinkedIn in the form of software development prowess that Microsoft brings to the table, which LinkedIn was beginning to miss over the past few years. In 2014, it paid almost $9.4 billion for the smartphone operations of Nokia and some years earlier spent more than $6 billion for aQuantive, an internet advertising company, but ended up writing off most of the value of those deals after they performed poorly.
In that light, for Gates to throw his support behind Microsoft’s $26 billion LinkedIn deal, seen by some to be a too-steep premium, there might just be something for shareholders to celebrate here. Nadella must be hoping that this one will be more successful. In February, it gave a surprise forecast for slower growth that led to a big sell-off, wiping out almost $11 billion in market value. Because I feel the long-term benefits for Microsoft will far exceed the cost. “A LinkedIn-powered experience could start to look a lot more like a traditional B2C customer experience: smart and personalized”. Microsoft is one of LinkedIn’s biggest customers.
In May 2015, LinkedIn used its then-high stock price to acquire online educational company Lynda.com in a $1.5 billion deal.
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That’s a particular problem for LinkedIn, which hands a lot of shares to employees as part of their compensation.
