image from forbes.com By: Kayleigh Yerdon, Cornell University
You might have heard on Monday that Microsoft endorsed LinkedIn big time. Monday morning before the market opened, Microsoft announced that it had acquired the professional social media site for $26.2 billion. Yes, you read that right, $26.2 billion. That seems like a huge expense – in fact, the largest acquisition in the history of the software industry. So, what’s in it for Microsoft after this huge investment?
First, by acquiring LinkedIn, Microsoft has finally taken a swing in the social media ballpark. Microsoft has historically been known for succeeding as a software company. However, many evaluations of Microsoft in the past few years have stated that the company would face a standstill in the tech industry until it made moves to develop some form of social media platform. By incorporating the services of LinkedIn, Microsoft can now not only appeal to business professionals via computer software systems such as Outlook, Office, and Skype, but also connect workplaces through social media. Essentially, LinkedIn’s business-oriented platform fits perfectly with Microsoft’s supposed “missing piece.”
Microsoft doesn’t just plan to own LinkedIn’s services, though. The company plans to integrate LinkedIn’s features with each one of its existing apps and services such as Skype, Outlook, and Cortana (Microsoft’s “intelligent personal assistant” in Windows 10 – a “Siri” competitor). So, each of Microsoft’s services as we know them could be seeing changes towards more advanced social media recognition and capability. Furthermore, the acquisition of LinkedIn will give Microsoft access to the 433 million active LinkedIn users. Integrating these users into Microsoft systems could effectively double the amount of Outlook users and more than double the amount of Windows 10 users. It could increase the number of Skype users by 6 times, too. This seems to be all good for Microsoft – but, how did the markets react to this announcement?
After the morning bell on Monday, LinkedIn’s stock price jumped 47%. This reaction illustrates positive investor sentiment towards LinkedIn – a forecast that Microsoft’s acquisition of the social media platform might help LinkedIn’s future business. At the same time, Microsoft stock traded down a little over 3%. Although fluctuations of this size are not totally uncommon, it is interesting that Microsoft’s stock traded down after its seemingly beneficial announcement. This may indicate some investor insecurity over how a deal of this size will really play out for the company. Many reports have acknowledged the fact that Microsoft has historically had trouble integrating its large acquisitions in the past – and that this deal with LinkedIn is far larger than any that Microsoft has ever attempted. In return, Microsoft has stated that they plan to keep the existing LinkedIn management team on board throughout the acquisition, so as to ensure a smooth transition between the two companies.
The acquisition and integration of LinkedIn could be a very telling predictor for the near future of Microsoft. It will be very interesting to see how Microsoft’s stock continues to react throughout the progression of integrating LinkedIn. As always, it is best to stay informed as events like these might help you to make your investment decisions!