Yahoo Finance How the LinkedIn Marriage Will Affect Microsoft Stock (LNKD MSFT)
If LinkedIn (LNKD) possesses a parallel networking universe, then the events just prior to June 13 went something like this:
-- Microsoft Corp. (MSFT) CEO Satya Nadella to LinkedIn CEO Jeff Weiner: "I'd like to add you to my professional network on LinkedIn."
-- Computer screen: "How do you know Jeff?" (Check the appropriate circle). Colleague? Nope. Classmate? Ixnay. Ah, here it is: "We've done business together -- or I soon hope to."
-- Weiner to Nadella: "Forget the professional network, Jack. Can you save my company?"
-- Nadella: "The name's Satya. Anyway, funny you should say that. Step into my office suite."
Or more accurately: Step into Microsoft's Office suite. The $26.2 billion purchase of LinkedIn came at an astounding $196 a share -- it had been trading at $131. But Microsoft has ample reason for the premium. Combine LinkedIn's workspace clout with Microsoft's computational might, and you've got a recipe for superior synergy.
In fact, you could call it the high-tech shot heard round the world.
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"LinkedIn's 430 million users make up a massive virtual Rolodex," says Holger Reisinger, senior vice president of business solutions at Jabra and based in Denmark. "By combining it with Microsoft's array of collaboration tools, we suddenly have a lot of outstanding resources right at our fingertips. ... That's where the real potential of the merger lies."
There is a downside potential as well. "Microsoft envisions LinkedIn as a 'newsfeed,' which will become the centerpiece of information at the office," says Eden Chen, CEO and founder of Fishermen Labs, an app development company. "The obvious problem with this is that LinkedIn makes money on recruiters and companies -- including mine -- loathe recruiters."
"I have no doubt that Microsoft will try to use the 433 million people who have their profiles on LinkedIn to sell them software and services," adds Peter Cohan, lecturer of strategy at Babson College. "But there is no reason to believe that Microsoft has the strategic skills needed to revive LinkedIn's growth."
Somewhere in the middle lies an office-geek tech battle yet to be waged, where Microsoft and LinkedIn take on Salesforce, the top dog in software that manages prospect and customer information.
"The obvious use of LinkedIn against Salesforce is to pre-populate Microsoft's customer relationship management," says Duncan Davidson, general partner at the venture capital firm Bullpen Capital in Menlo Park, California. "CRM after all ultimately comes down to the people you are selling to. There are privacy and other limitations here -- but having LinkedIn is much better than not."
At least for now, LinkedIn has emerged as a clear winner.
LNKD had dubious company among the likes of Square (SQ), Twitter (TWTR) and Fitbit (FIT): glamorous high-techs with grotesque track records in 2016. And in February, LinkedIn lost nearly half its share price -- and more than $10 billion in market cap -- after disastrous projections called for earnings of 55 cents a share, 19 cents lower than analysts expected.
And so the deal was a LinkedIn lifesaver, while the news hardly rocked Microsoft stock. Shares of MSFT have remained flat since June 13, trading at $52, and likewise lukewarm since the start of 2016.
Yet there could be one immediate image benefit from joining forces. Among digital highbrows and the white-collar crowd, LinkedIn is a cool startup. Microsoft is a geeky stalwart.
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Still shaking the deathly PR dust of former CEO Steve Ballmer -- named America's worst by several publications -- Microsoft is not an easy company to love. But since Ballmer's exit in 2013, shareholder value has bounced back, almost under the radar.
Buoyed by the recent success of the Surface 3 computer/tablet hybrid, and its commercial cloud services, Microsoft needs one more feather in its cap to announce its return to relevance. Enter the LinkedIn deal, which quite a few digerati seem to like.
"It demonstrates a dramatic shift away from traditional learning management systems," says Iain Scholnick, founder and CEO of San Francisco-based Braidio, a collaborative learning platform for talent development. If all goes well, "training programs will transform to allow employees to consume knowledge within their daily workflow."
Just as long as those LinkedIn workers don't flow out the door.
"Having worked at LinkedIn for a number of years I can attest to the incredibly strong culture LinkedIn has built," says Leela Srinivasan, current chief marketing officer of Lever, a company that helps source and hire top talent. It's also based in San Francisco.
"LinkedIn's ongoing independence is vital to ensuring that those precious intangible assets remain intact and continue to serve as differentiators for LinkedIn, while also preventing a talent exodus," Srinivasan says.
But some experts believe the benefits for LinkedIn look puzzling at best, disconcerting at worst. It's not as though Microsoft has developed a golden touch reminiscent of Apple under the late Steve Jobs.
"It's not clear at all that this will help LinkedIn in any way," says Abraham Seidmann, a professor at the Simon Business School at the University of Rochester. "Their experience with Skype is that they took a great product and service and drove it into the ground." The cost to Microsoft: $8.5 billion in cash.
The roll call hardly stops there. MSFT also botched the acquisitions of Finnish technology company Nokia and digital marketing service aQuantive. Still, those were all Ballmer-era bungles that taught some painful lessons.
"Word is Microsoft is going to largely leave LinkedIn alone," says technology analyst Rob Enderle of the Enderle Group. "If they do that and manage this more like an investment, where Microsoft is the board, things should work out better."
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"In today's world of machine learning and artificial intelligence, data is power," says Josh Sutton, artificial intelligence practice lead at Publicis.Sapient, a digital transformation platform. "With the acquisition of LinkedIn, Microsoft has obtained one of the most valuable sources of data available today."
Weiner to Nadella: "Thanks for connecting. I'm looking forward to working together."
Nadella to Weiner: "And I'm looking forward."
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