There was a time in the not to distant past when mentioning the name Microsoft would have sent fear right into the bones of its competitors, similar to the way opponents were petrified of Mike Tyson's punching power until they realised he was human after all. Today, whilst still a formidable giant in its sector, it would be fair to say that Microsoft has been some what in the shadows of heavy weights opponents such as Apple, Google, and Facebook. Many even argued that the company's failure to grab a significant piece of the mobile market share hampered its defensive ability against the competitive combinations blows landed by its opponents.
Until today, Microsoft's impact on the Social Networking arena was mild at best. Apple and Google big share of the mobile market, on the other hand, enabled them to exploit several aspects of the Social Media super-train significantly more.
Microsoft's acquisition of LinkedIn is without doubt its most ambitious statement in years. It has a potential market-size of over 430 million members globally where people advertise their professional skills and work history. LinkedIn membership size is dwarfed by the likes of Facebook, but the professional make-up of its members could be the kind of tonic that Microsoft is looking for as it continues to shift focus to more cloud-based computing products and services.
The Financial Nature of The Deal
This acquisition is Microsoft's biggest in its entire history. $26.2 billion is certainly not pocket change for any firm irrespective to the size of its financial purse . Even with Microsoft's deep pockets, the deal still accounts for around a quarter of the company's available cash in hand. Nonetheless, Microsoft has decided to fund this deal via a loan. Several business commentators point to the fact that a loan of this size could be a strategic way to reduce the tax burden that the company would otherwise have to pay on its profits.
Whatever the financial structure or reasoning for not paying in cash, the magnitude of the deal does raise some eyebrows with investors and the markets since Microsoft's track record in Mergers and Acquisitions is perceived to be generally weak. Recently, though, Microsoft's $2.5 billion acquisition of video game maker Minecraft in 2014 is generally considered a triumph. So perhaps greater lessons has been learned by the company.
The Operational Way Forward
Microsoft's CEO Satya Nadella, appointed to that role since 2014, stated that LinkedIn will remain a separate business entity. He emphasised that the shared mission of both companies is to help people work more efficiently. Nadella went on to say: "There is no better way to realise that mission than to connect the world's professionals." He further elaborated on how people could be scheduling meetings through Microsoft Outlook Calendar which would automatically offer them background information about every participant of the meeting including their education, shared connections and experience. In addition, the intention is to extract and harness combined data from both companies for improved marketing.
Despite Microsoft and LinkedIn agreeing this acquisition deal, there are still regulatory hurdles to be cleared in the United States, the European Union, Canada, and Brazil. Saying that, there are no known indicators that approval of this acquisition will be problematic in any of the countries mentioned above.
Microsoft has made a real statement of intent with the acquisition of LinkedIn. Once this acquisition is finalised, Microsoft will have an enhanced position of strength in the cloud-based business-oriented software sector. The firm would be able to match Salesforce (the current sector leader) blow for blow in this heavy-weight business division. Most analyst, whilst perhaps having some reservation about the cost of this acquisition, agree that this deal makes business sense for Microsoft, and has great potential for increased long-term shareholder value - the ultimate goal of any merger or acquisition.
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