Microsoft has made a surprise move to acquire business-oriented social network LinkedIn for $26.2 billion cash in a deal expected to close by the end of December.
The Redmond-based vendor said LinkedIn will retain its “distinct brand, culture and independence.” Jeff Weiner will remain CEO of LinkedIn, reporting to Microsoft boss Satya Nadella.
A statement emphasised that Reid Hoffman, chairman of the board, co-founder and controlling shareholder of LinkedIn, and Weiner both support the deal.
LinkedIn claims to be “the world’s largest and most valuable professional network,” with 433 million members (therefore valuing each one at more than $60 according to today’s news) and 105 million unique visiting members per month.
The network was founded in 2002 and launched in 2003. It floated In New York in 2011 with a value at the time of $4.25 billion.
Microsoft’s $196 per share offer is a 50 per cent premium on the stock’s closing price last Friday. Shares in LinkedIn surged 47.8 per cent on the news, while Microsoft’s share price fell by 4.1 per cent.
LinkedIn reported a net loss of $45.8 million in the three months to 31 March, compared with $42.5 million a year earlier. Its annual revenue is around $3 billion.
In recent times it has faced criticism for the quality of its mobile offering, and its user interface in general, but over the past year took steps to address these shortcomings. It has launched a new version of its mobile app that helped drive an overall growth in mobile consumption; LinkedIn says mobile usage increased 49 per cent year on year to account for 60 per cent of total traffic to the platform.
“Today is a re-founding moment for LinkedIn. I see incredible opportunity for our members and customers and look forward to supporting this new and combined business,” said Hoffman.
The two businesses are touting the deal as a combination of the world’s foremost professional cloud and professional networking companies.
“We are in pursuit of a common mission centered on empowering people and organisations,” wrote Nadella in an internal company memo leaked by The Verge. “Along with the new growth in our Office 365 commercial and Dynamics businesses this 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. It requires a vibrant network that brings together a professional’s information in LinkedIn’s public network with the information in Office 365 and Dynamics.”
“This combination will make it possible for new experiences such as a LinkedIn newsfeed that serves up articles based on the project you are working on and Office suggesting an expert to connect with via LinkedIn to help with a task you’re trying to complete. As these experiences get more intelligent and delightful, the LinkedIn and Office 365 engagement will grow. And in turn, new opportunities will be created for monetisation through individual and organisation subscriptions and targeted advertising.”
“I’ve been thinking about this for a long time,” added Nadella in a video (see below). The deal marks by far the company’s largest acquisition under Nadella’s tenure.
Analyst Jack Gold was upbeat on the deal. “While Microsoft paid a significant sum for LinkedIn, it has a good deal of cash it can use, so this won’t be much of a stretch for them. Further, it provides Microsoft leverage in a market targeted at business users where its future lies,” he wrote.
“Unlike problematic acquisitions in the past in hardware (most recently Nokia), this should provide Microsoft with a highly leveragable product base and qualified user base to market to. All in all, this should be a major positive for Microsoft longer term as it moves to be more of a services company than just a HW/SW company.”
Upon closing, Microsoft expects LinkedIn’s financials to be reported as part of its Productivity and Business Processes division.