Dubai: Microsoft’s acquisition of LinkedIn, by paying around 50 per cent premium, has raised several eyebrows but it could bolster the software giant’s slipping grip on corporate computer systems.
Microsoft had a grip over corporate computing with its Windows operating system and Office suite but the growth of the mobile devices and the cloud has put its traditional dominance under attack.
Moreover, Microsoft, known for overpaying for its acquisitions, have raised questions too.
It has written down the entire $7.2 billion paid for Nokia and the $6.3 billion shelled out for online advertising agency aQuantive. The results of $8.5 billion acquisition of Skype have been underwhelming and Yammer has been a mixed bag, but that were sealed by Microsoft chief executive Satya Nadella’s predecessor, Steve Ballmer.
The $26.2 billion LinkedIn deal is the biggest ever for Microsoft as Nadella focuses his attention to corporate customers with cloud services and productivity tools.
Last year, the bright spot for Nadella has been its acquisition of Mojang AB, which developed “Minecraft” video game, for $2.5 billion.
“It’s an interesting deal. Microsoft sees opportunities to grow in sectors they have been absent from. There are synergies in terms of technology that they can exploit as well,” Sukhdev Singh, associate vice-president at market research and analysis services provider AMRB, told Gulf News.
He said that LinkedIn had a strong performance over the last few years. As of fourth quarter 2015 results, it had an earnings before interest, tax, depreciation and amortisation (Ebitda) at around 30 per cent, and a year-on-year growth of around 30 per cent, it is a growing company and a fast growing industry segment too.
Unlike Nokia, he said, the LinkedIn deal is more for returns and increasing its business breadth.
LinkedIn, a treasure trove of professional data with 433 million members, including 105 million active monthly users, is struggling to grow its user base when compared to Twitter’s 305 million and Facebook’s 1.65 billion monthly users.
Singh said that there are synergies in terms of using technology backbone that Microsoft can provide and LinkedIn’s revenue-focused business model. “The Microsoft reach will benefit in more ways for LinkedIn. At the same time, having a social linking within the software makes its more powerful,” he said.
Another interesting addition, he said, is in Lynda.com. Microsoft now has access to Lynda.com, a training videos channel that LinkedIn took over a few months back.
More tech companies will become a takeover target this year. Singh said that Twitter’s performance over the last few years, unlike LinkedIn has not been all that well. They have struggled both in generating revenue growth as well as user base.
However, according to Singh, Microsoft’s deal had an impact on Twitter stock, which moved upwards by more than four per cent. Given the need to integrate social presence with software, and the fact that Microsoft has LinkedIn in its portfolio, the odds of Twitter being taken over this year are higher than ever.