Microsoft is buying the professional networking website LinkedIn for $26.2 billion, making it the biggest acquisition the software giant has made up to date.
Microsoft will pay $196 a share – a premium of almost 50% to Friday’s closing share price.
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.
According to Professor Mark Skilton, of Warwick Business School, “The acquisition makes sense in respect of Microsoft’s link with enterprise in its cloud platform and portfolio of enterprise business services, it will help Microsoft build out its enterprise services capabilities.
“The long running rumours of LinkedIn not being able to develop any new growth strategies, with its net income falling year on year from 2011, have finally come home to roost with the Microsoft acquisition of $26bn in cash.
“LinkedIn has grown a user base of 106 million active users, but compared to 310 million active Twitter users and the mighty 1.65 billion Facebook monthly users, LinkedIn has never managed to grow its commercial services in what could have been a strong enterprise market.
“LinkedIn makes two thirds of its income from talent solutions in recruiting and job market services that define it and the remainder in selling marketing solutions and premium subscriptions. It has remained the website to go to for professional networking.”
Mr. Nadella said today’s work is split between tools workers use to get their jobs done, such as Microsoft’s Office programs, and professional networks that connect workers. The deal, he said, aims to weave those two pieces together.
“It’s really the coming together of the professional cloud and the professional network,” Mr. Nadella said in an interview on Monday.
Microsoft also sees opportunities in Lynda.com, a channel for training videos that LinkedIn bought for $1.5 billion last year. Microsoft will be able to offer Lynda’s videos inside its own software, such as Excel spreadsheets.
Mr. Nadella also talked about giving its Cortana digital assistant access to data from LinkedIn.
The deal dwarfs other Microsoft acquisitions. Its next largest deal, buying the Nokia handset business, led to Microsoft taking charges that exceeded the $9.4 billion price. That deal was orchestrated in 2014 by Microsoft’s previous chief executive, Steve Ballmer.