Deal brings together the world’s leading professional cloud with the world’s leading professional network.MyPOV - A good and true headline for both vendors. Is this the largest for Microsoft.
REDMOND, Wash., and MOUNTAIN VIEW, Calif. — June 13, 2016 — 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 will retain its distinct brand, culture and independence. Jeff Weiner will remain CEO of LinkedIn, reporting to Satya Nadella, CEO of Microsoft. Reid Hoffman, chairman of the board, co-founder and controlling shareholder of LinkedIn, and Weiner both fully support this transaction. The transaction is expected to close this calendar year.MyPOV - Good summary of what happened. Probably a good move the keep LinkedIn separate. But then there is always the question on how the synergies can be tackled and the key tradeoffs between e.g. a LinkedIn roadmap vs a synergy drive / Microsoft roadmap. Personally fully in the camp of keeping things separate - as blogged here.
LinkedIn is the world’s largest and most valuable professional network and continues to build a strong and growing business
Over the past year, the company has launched a new version of its mobile app that has led to increased member engagement; enhanced the LinkedIn newsfeed to deliver better business insights; acquired a leading online learning platform called Lynda.com to enter a new market; and rolled out a new version of its Recruiter product to its enterprise customers. These innovations have resulted in increased membership, engagement and financial results, specifically:
· 19 percent growth year over year (YOY) to more than 433 million members worldwide
· 9 percent growth YOY to more than 105 million unique visiting members per month
· 49 percent growth YOY to 60 percent mobile usage
· 34 percent growth YOY to more than 45 billion quarterly member page views
· 101 percent growth YOY to more than 7 million active job listings
MyPOV - Good summary on the progress LinkedIn has done in the last 12 months. Likely it would have been a cheaper target back then - but a year ago it was all about Microsoft buying … Salesforce. A very different target.
“The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals,” Nadella said. “Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the planet.”
MyPOV - Good quote by Nadella - no surprise on Office, where the value is at hand, as proven by numerous integration products - would have liked to see more color on the Dynamics side. But let's read on.
“Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn’s network, now gives us a chance to also change the way the world works,” Weiner said. “For the last 13 years, we’ve been uniquely positioned to connect professionals to make them more productive and successful, and I’m looking forward to leading our team through the next chapter of our story.”
MyPOV - Good to see Weiner staying on and taking more of a Future of Work direction, that in my view has come always too short for LinkedIn. And I was never sure why the HCM message was so de-emphasized at LinkedIn because Weiner did not want to confuse the ‘cheese and mousetrap’ - or if this was still a learning path. Stay tuned. [...]
“Today is a re-founding moment for LinkedIn. I see incredible opportunity for our members and customers and look forward to supporting this new and combined business,” said Hoffman. “I fully support this transaction and the Board’s decision to pursue it, and will vote my shares in accordance with their recommendation on it."
MyPOV - Good to see Hoffman on Board, key LinkedIn shareholder. But his quote made me aware of - what is in this for the LinkedIn users? What is in here for the shareholders?
Microsoft will finance the transaction primarily through the issuance of new indebtedness. Upon closing, Microsoft expects LinkedIn’s financials to be reported as part of Microsoft’s Productivity and Business Processes segment. Microsoft expects the acquisition to have minimal dilution of ~1 percent to non-GAAP earnings per share for the remainder of fiscal year 2017 post-closing and for fiscal year 2018 based on the expected close date, and become accretive to Microsoft’s non-GAAP earnings per share in Microsoft’s fiscal year 2019 or less than two years post-closing. Non-GAAP includes stock-based compensation expense consistent with Microsoft’s reporting practice, and excludes expected impact of purchase accounting adjustments as well as integration and transaction-related expenses. In addition, Microsoft also reiterated its intention to complete its existing $40 billion share repurchase authorization by Dec. 31, 2016, the same timeframe as previously committed.MyPOV - Ok - leaving this to the colleagues who mostly wear ties - the financial analysts to dissect. But: Debt given the interest rates is a good choice… wonder if Microsoft can use some over seas cash here.
Overall MyPOV
Likely a good move by Microsoft… the company is an enterprise player and secured the enterprise social network. With Facebook ad Google out of reach for many reasons, this makes both sense in the overall fit and achievability categories.Plenty of synergy opportunities - so many they weren't listed here in the press release and not sure they were all mentioned in the conference call. And that makes it also a concern - too many synergies to chase and build for a combined entity can also become a challenge where a vendor can remain empty handed. But this is Nadella’ first very big acquisition, so we should not be surprised with learning about a meticulous plan and tracking towards a specific milestones here. Still the challenge remains palpable.
On the LinkedIn side the question is - why does this drive user sign ups and clicks to LinkedIn. Every Office accounts it's LinkedIn account will work. But that doesn't address the need why to go to LinkedIn day by day. And covering this acquisition from a Future of Work / HCM perspective - not sure if Microsoft can help flesh out the LinkedIn powered HCM potential - as the vendor has no HCM track record and HCM capabilities itself (at the moment).
On the bright side I am the most positive on what LinkedIn can bring to Cortana - almost immediately. Of course the question will come up on who owns and can use the data... And as an analyst covering cloud infrastructure / IaaS one has to note that Microsoft snatched the largest social network available for creating future Azure load. Great to have in the back pocket to fuel growth from conversion when the Office365 bonanza will slow down at creating Azure / cloud load.
Lastly - at their core - Microsoft is a an enterprise software / SaaS company - LinkedIn a business professional DaaS (Data as a Service) company. Two chasms to bridge - keeping in mind no SaaS (or enterprise software vendor) has had success with a DaaS acquisition - till today.
But today it is time for congrats to Microsoft for a gutsy move. Plenty of upside, a good challenge to have. Stay tuned.