Microsoft Acquires LinkedIn for $26.2 Billion

Companies like Microsoft and Google are always on the look for acquiring potentially growth companies, its interesting to see that these kind of acquisitions are normally not revenue-centric, but rather on having dominance in a certain market segment.

Microsoft is moving faster to gain the dominance in the enterprise world, after acquiring Skype, Yammer, Sunrise and recent failed bid to salesforce, shows that Microsoft is creating a portfolio around the same direction.

LinkedIn, Facebook and Twitter have been in talks since years. Despite the ups and downs these networks have become a really big deal and that’s why they can’t be failed. LinkedIn has been a giant in the industry since its start and had few companies under its belt but yet it was unable to generate revenues.

Linked failed to monetize despite making good acquisition moves like Lynda and Slideshare.

Back in 2006, Google acquired YouTube for only 1.65 billion dollar. YouTube is now worth way more. Another similar and major acquisition was witnessed recently when Microsoft acquired the well-known and biggest professional network for 26.2 billion dollar. LinkedIn was raising 120 million dollars in funding and it went IPO few years back with market capitalization of 37 billion and it was not profitable even then.

This acquisition by Microsoft is however biggest in history. This is actually a very smart move by Microsoft as it is focusing more on corporate section. After acquisition of yammer and Skype it was likely that Microsoft will focus on LinkedIn. Microsoft’s previous acquisitions of Skype and Nokia weren’t worth this recent acquisition. The Nokia acquisition was a big failure as Microsoft was in rush to capture the mobile industry and this move doomed Nokia. It is likely that Nokia will find a new home sooner or later.

Reason behind such large scale acquisition

LinkedIn has more than 433 million users. Two members join LinkedIn every second. Microsoft said that this acquisition will be great for Microsoft as it will directly upgrade the sales of Microsoft office products. Since Microsoft services are for professionals and LinkedIn is by far the largest professional network. It is likely that Microsoft would generate more sales while LinkedIn will keep its separate functionality.

LinkedIn users are basically the main focus of Microsoft. LinkedIn is going to offer Microsoft the professional audience it always required. LinkedIn is providing Microsoft the essential network while Microsoft will motivate that network to adapt Microsoft products. Microsoft will integrate LinkedIn features in its products. For instance LinkedIn bought online training software Lynda.com for 1.5 billion dollars and now excel spreadsheets will contain features of Lynda.com. Microsoft will also embed LinkedIn with Skype and its other products.

What can we predict for future?

Such acquisitions have been seen in history when Facebook bought Instagram for 1 billion dollars and WhatsApp for 19 billion dollars. Now twitter seems to be in a position of such move. Twitter is a large scale network and it has no chance to fail but it is struggling with revenues. Twitter has almost same funding, IPO and growth record as LinkedIn. Let’s see when we will be hearing about this another great acquisition.

Final word: This acquisition will be successful

Unlike Microsoft’s doomed Nokia acquisition, this one would be a success. Word has it that Microsoft has made the right decision that’ll ultimately grow Microsoft. Analysts all around the world have reported that this idea by Microsoft is probably the best decision ever made by Microsoft.