Microsoft on Monday said it was buying the professional social network LinkedIn for US$26.2 billion in cash, a move that would help 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 is taking a big step into the world of social networking, adding 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 officer Satya Nadella said in a statement.
Nadella added that LinkedIn “has grown a fantastic business and an impressive network of more than 433 million professionals.”
LinkedIn “will retain its distinct brand, culture and independence,” with Jeff Weiner remaining as LinkedIn chief executive officer, a statement from the two firms said.
The companies 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 as Microsoft is moving away from its role as a pure software firm, and LinkedIn seeks 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.
However. the company reported a loss of US$46 million in the past quarter and a US$166 million loss for last year, which put its shares at multi-year lows early this year.
LinkedIn, which calls itself “the world’s largest and most valuable professional network,” has been seeking to expand its offerings with more messaging and mobile applications, and revamped its “newsfeed” to help boost engagement.
Analysts were divided about whether the deal is good for Microsoft.
Benedict Evans, a member of the Andreessen Horowitz venture capital firm, who blogs about technology, said it seems 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,” he said in a tweet, referring to the company’s Wall Street trading symbol.
J. Gold Associates founder and principal analyst Jack Gold said LinkedIn “is highly complementary” to Microsoft services, such as Skype for Business and Yammer.
The acquisition “gives Microsoft a great way to keep a pulse on what business users are doing on the Web and how they may use certain tools and products,” Gold said.
“This ability will give Microsoft lots of knowledge in what and how to deploy future products,” he added.
However, Endpoint Technologies Associates analyst and consultant Roger Kay said it is doubtful Microsoft can use the deal to compete in a world of social networking dominated by Facebook.
“It does not help at all competing with Facebook,” Kay said. “LinkedIn is not in the same league as Facebook.”
Microsoft, paying a premium of about 50 percent for LinkedIn, would probably end up writing down much of the investment, Kay said.
“It seems extraordinarily expensive,” he added. “There is no way they can extract US$26 billion from LinkedIn.”
Global Equities Research cofounder Trip Chowdhry said Microsoft has not learned from a string of failed acquisitions.
Microsoft “was late to mobile” with its purchase of Nokia’s phone division and “failed miserably on it,” he said, adding that Skype usage “has gone in only one direction, and that is down.”
“It is extremely difficult for a company to acquire insights,” Chowdhry added.
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