Monday, June 13, 2016

Microsoft's $26.2b LinkedIn gamble: I'm not impressed

The tech world was buzzing this morning with news that Microsoft had made a $26.2 billion U.S. offer to buy LinkedIn. The move seems to position Microsoft to make inroads in the fast-moving enterprise social market - think Facebook, only for businesspeople - but I'm not entirely convinced that this is a smart move.

Lots of reasons why I'm not drinking the megadeal Kool Aid. First and foremost, Microsoft has a history of writing large cheques on splashy acquisitions, most of which either never go anywhere (Skype) or quite literally crash and burn (Nokia, aQuantive).

While acquisitions can be an effective means of establishing presence in fast-evolving tech sub-sectors like enterprise social (it's faster to buy an existing, substantive and successful player than it is to develop the technology and eminence on your own), the cultural challenges of integrating a player like LinkedIn into its day-to-day operations and strategic vision are monumental, and Microsoft wouldn't be the only tech titan to run into headwinds on the integration front.

LinkedIn's more recent difficulties with flatlined user and revenue growth, which decimated its share price prior to today's announcement, reinforce the belief that Microsoft is paying a serious premium for a second-rate target. It's hard to see where the $26.2 billion U.S. in differential future value is going to come from - or why Microsoft felt compelled to offer such a massive premium for LinkedIn when no one else was apparently ready to make a similar deal.

We're 13 years into LinkedIn's history, and a similar amount of time into the social and enterprise social timelines. The company and the enterprise social media sub-sector are closer to middle-age than anything else, and you'd think the offer size would reflect the fact that this company's and its market's best days may no longer be ahead, but behind.

So, yes, I'm a bit cynical. But I'm hardly alone: Microsoft shareholders pushed its stock price down following the announcement this morning.

I discussed my concerns with BNN's Michael Hainsworth in a live interview earlier today. Here's the link.

Your turn: Do you use LinkedIn? If so, why? If not, why not?


L Toes said...

I use it every day to search for employers for our students, review people's career paths and learn industry information. I also find people's posts more useful than in the past in terms of professional development.

Kalei's Best Friend said...

I have a relative who has a profile on it... I wonder if the site ever verifies... My relative posted in accurate facts about his history and past 'employment'.... I am assuming it doesn't .. therefore, I have doubts about the site.. As one of my adult kids have said ' its another Facebook'... and we all know how credible that site can be/not....

Dianne - Bunny Trails said...

I found it interesting that Michael brought up that 1 in 3 people in the US has a LinkedIn account, as that sounds incredibly high. Also, just because people have an account there doesn't indicate usage. I have one which I pretty much never use and I know I'm not alone in that.

I agree with your earlier commenter who mentions the accuracy of LinkedIn. You could put pretty much anything out there, as there is no verification system in place.

I think you really nailed this one, Carmi, as I can't imagine Microsoft making a booming success out of something as lukewarm as LinkedIn after all these years.