Cash rich Microsoft has announced that it will be buying LinkedIn for $26.2 Billion. Microsoft Corp. (Nasdaq: MSFT) and LinkedIn Corporation (NYSE: LNKD) on Monday announced they have entered into a definitive agreement under which Microsoft will acquire LinkedIn for $196 per share in an all-cash transaction valued at $26.2 billion, inclusive of LinkedIn’s net cash.
LinkedIn is in the thriving business of finding jobs for professionals and good talent for companies. Offering $26.2 Billion is a big sum, what’s so special that makes Microsoft offer a hefty $26.2 Billion for the acquisition of LinkedIn? Today LinkedIn has got more than 100 million active users. All of them are professionals in their fields. Microsoft started off in the PC market selling it’s DOS operating system in 1980s and then it got it’s breakthrough in 1990s when it launched it’s Windows Operating System. Microsoft still makes a lot of money by selling Windows OS to PC users who are addicted to it. But it missed the internet age. Microsoft just didn’t envisage internet as Google did. Then Apple beat Microsoft in the mobile phone business.
With a new CEO at it’s helm, Microsoft now wants to retool itself and become a leader in selling online services to business customers. It started the Cloud business which has been doing well for Microsoft. LinkedIn fits in well with the new business model that Microsoft wants to implement.
And while LinkedIn’s audience isn’t as big as mainstream social networks like Facebook, Twitter, or Instagram, it’s a highly lucrative audience. Companies are willing to spend considerable sums of money to find the best employees, and LinkedIn effectively has the world’s largest Rolodex of skilled professionals. LinkedIn’s “talent solutions” business — charging businesses to post job ads and provide other recruiting services — accounted for almost two-thirds of LinkedIn’s $3 billion in revenue.
Microsoft has big plans for LinkedIn. That’s why it is willing to offer $26.2 Billion to acquire it. With it’s Windows OS making money for it, Microsoft has a lot of cash to offer to buy what it wants. A few years back Microsoft entered the mobile phone business when it bought Nokia for around $10 Billion. Today Microsoft Windows phone are selling because of their low price point but still not able to beat Android phones. The margin is too wide.
The deal is Chief Executive Satya Nadella’s latest effort to revitalize Microsoft, which was viewed not long ago as left behind by shifts in technology. Mr. Nadella hopes the deal will open new horizons for Microsoft’s Office suite as well as LinkedIn, both of which have saturated their markets, and generally bolster Microsoft’s revenue and competitive position.