In the largest transaction in its history, Microsoft Corp. will acquire LinkedIn Corp. for US $ 26,200 million in cash and a premium of 50% over the value of the social networking company at Friday’s close.
the integration of Microsoft’s offer and LinkedIn expand the scope of both will enhance its utility and create market leading services, according to the companies.
Microsoft said that LinkedIn “will retain its brand, culture and independence” and that the current CEO, Jeff Weiner, will continue to lead the company and report to the CEO of Microsoft, Satya Nadella. It is expected that the transaction will close this year.
The purchase would allow the combined company to save about US $ 150 million in annual costs by 2018, according to the companies. Should abandon the operation, LinkedIn must pay a fine of US $ 725 million.
Microsoft believes that the acquisition will expand the market for both Microsoft Office products to LinkedIn. In recent years, the software giant has made significant efforts to ensure that their products are more connected, and now wants to make them smarter by using data. The vast network LinkedIn offers information that could help this purpose.
At the end of the first quarter, LinkedIn reported having 433 million members, 19% higher than a year earlier. Microsoft can find ways to generate revenue from the professional network LinkedIn that the Redmond giant can not do alone, said Stifel Nicolaus analyst & amp; Co. Brad Reback.
Direct connection with Office LinkedIn allow attendees to a meeting, for example, learn more about other attendees through invitations on their calendars. Sales representatives may also collect information and useful data on potential customers from LinkedIn data.
Microsoft is betting that the combination of services from both companies increase worker productivity by revealing connections and data that would otherwise take much longer to find. This could increase the value of Office for customers, and helps explain why Microsoft made the deal.
LinkedIn went public in May 2011 at US $ 45 a share, in what was the largest initial offering of an Internet company since Google Inc.’s debut in 2004. in its first day of trading, shares of LinkedIn more than doubled.
the shares peaked around US $ 270 in February 2015, but have since lost almost half its value. The company forecast a 2016 much weaker than expected amid change your advertising strategy.
Unlike other social networks that mainly based their income on advertising, about two-thirds of the LinkedIn revenues come from its talent solutions division, which helps companies recruiters and recruiters to identify candidates for jobs. The unit earned US $ 558 million in the first quarter, 41% more than a year ago.
Microsoft “is paying the full price, but not a terribly high price,” Reback said. “The bet is worth”.
In a note to employees, Nadella said the combination will feed functions as the wall LinkedIn with at a time “based on the project being worked items” given, or Office suggests connect to an expert via LinkedIn to help with a task.
as you grow complementation between LinkedIn and Office “new opportunities for income generation” will be created, he said Nadella.
Weiner, in a letter to employees published on the Internet, said the acquisition will help the business climate LinkedIn to increase competition in the field of technology.
“Imagine a world in which we are no longer looking at the technology titans like Apple, Google, Microsoft, Amazon and Facebook wondering how it would operate in that extraordinary scale, because we will be one of them, “Weiner said. “With today’s news, we must not imagine anything like that because now [that] will be our reality.”
Weiner said he expected to be little changed for most of the employees on LinkedIn, except those They devoted exclusively to the maintenance of LinkedIn as a publicly traded company. “We will be helping you find your next game,” Weiner said of those employees.
Microsoft said it expects LinkedIn, which will be part of its segment in productivity and business processes have a minimal negative impact approximately 1% in the adjusted fiscal years 2017 and 2018. income is expected that the agreement start adding to earnings per share of Microsoft recently in 2019.
in recent years, Microsoft made a series of major acquisitions, including the issue purchase for US $ 9,400 million mobile phone business of Nokia Corp., most of which has already been discharged.
the company also spent US $ 8,500 million in 2011 to buy the provider of video chat and voice Skype SARL and US $ 2,500 million in 2014 by Mojang, maker of the popular game Minecraft.
Microsoft, which seems to have done a deft transition to the new world of on-demand computing web-based, had a weak growth in the third quarter with the growth of their business in the cloud.
LinkedIn reported US $ 2,990 million in revenue in 2015, an increase of 35% over the previous year, while its loss widened to US $ 15.3 million to US $ 164.8 million due to increased costs related to sales, marketing and product development .In its most recent fiscal year, which ended in June, Microsoft increased its revenues by 7.8% to US $ 93,600 million, but profit fell 45% to US $ 12,200 million, amid restructuring charges.
Lauren Pollock,
Joshua Jamerson and
Austen Hufford contributed
to this article.
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