Decoding the Microsoft-LinkedIn deal

On Monday, June 13th, when the news broke about the acquisition of LinkedIn by Microsoft for $26 billion, the first question that struck me was, does it make sense, given the chequered history of technology M&As? My curiosity as a technology and business professional leads me to analyze this deal from 4 perspectives: Customer base overlap, Microsoft’s business focus, Competitive forces and potential Products/ Service offerings. Before moving ahead with my thoughts, let me set the expectations of what this article does not try to address. I shall not be discussing the acquisition price of $26 billion: whether this price is low or high, whether the deal is EPS accretive or dilutive. Neither shall I focus on CEO statements or inside scoops of how this mega deal went through. There are enough valuable resources available to focus on these.

Let’s get started with the analysis. I would urge readers to comment their opinions, agreements, and disagreements below.

Customer Base Overlap

The single biggest reason of why there is an overall positive sense about this acquisition is the overlapping customer base of both companies. LinkedIn claims to have around 430 million users while the user base of Microsoft Office products exceeds 1.2 billion. And most of this demographic for both companies are working professionals across different industries. Simply put, more than 80% of LinkedIn users also use Microsoft’s Office products. (I might be taking liberty with numbers, but fact remains that almost all LinkedIn users must be using some kind of Office suite, and Microsoft is the clear leader there.)

Struggling to recall a past acquisition with such overwhelming customer base overlap.

Microsoft’s business focus

For the past couple of years under new leadership, Microsoft has been relentlessly focusing on the enterprise segment with industry leading growth rates of Azure cloud platform and success of Office 365. Their insignificant market share in the phone market (Windows Phones) and fledging laptop sales clearly suggest Microsoft moving away from the consumer segment where rivals like Apple and Google are strong. Going by their focus on enterprises, a professional networking platform complements their existing strategy.

Competitive forces

Counting the competitors of Microsoft can be daunting; ranging from Oracle, SFDC in SaaS space to Apple in hardware and OS to Amazon in cloud segment to Google in the internet space. Basically, Microsoft has a broad stack of products and they need a platform to glue these products upon. Microsoft has done considerably well to develop Outlook into a platform but it lacks strong user engagement that provides valuable data. This user engagement data enables Facebook, Google, Amazon enter into new businesses. LinkedIn can be that necessary platform.

Potential Products/ Service Offerings

This is an execution space where possibilities are endless. However, based on my understanding (which can be limited for such complex businesses), below are some of the obvious offerings that could be launched in the near future:

Virtual recruiting

Imagine a recruiter going through an applicant’s profile, pinging him/ her on Skype to get more information, having a video call to interview, take quick notes or use Whiteboard on OneNote and store necessary candidate documents on OneDrive. Easy and quick.
All of this is possible even right now, but applications are scattered. Bringing them together on the world’s largest recruiting platform can make things simpler for both employers and employees.

Enterprise wide Social Collaboration platform

Consider a project specific LinkedIn group/ workspace where team members constantly share materials, comment, take inputs and collaborate as if working in the same physical location. Reduces email clutter and miscommunication that is common with virtual teams.
Almost all large organizations have their proprietary social collaboration platform but their usage remains a question mark. Having an already established platform for collaboration along with the familiar Office suite tools integrated can increase usage.

Better Leads for selling enterprise software solutions

Lots has been written about personalized marketing using Facebook data in B2C space, but what about B2B segment? Exploiting LinkedIn data can yield similar benefits of personalized solutions in the B2B space as well. Better understanding of enterprise customers, business priorities can help in increased sales of cloud solutions for Microsoft.

Integrating Knowledge Management Solution (Lynda.com) into Office Suite

What about Lynda.com that LinkedIn acquired last year? An excellent knowledge management solution integrated into the Office suite can be an exciting prospect for most organizations looking to upskill their employees.

As I can understand, Microsoft’s acquisition of LinkedIn seems to be an excellent strategic fit. However, as past M&A deals suggest, successful execution and financial benefits often require more than strategic fit. Whatever new comes or does not come out of this deal, being a user of both Microsoft’s products and LinkedIn, offers exciting times ahead.

Disclaimer - Views expressed here are those of the author and should not be considered as views of the employer.