The purchase of professional networking site LinkedIn is by far the biggest acquisition in Microsoft’s history, with just over £18 billion to be handed over in cash. Microsoft will pay a premium of almost 50 per cent to LinkedIn’s closing share price on Friday at $196 a share. Satya Nadella, who became chief executive in the wake of Microsoft’s failed acquisition of Nokia’s handset division in 2013, said that access to LinkedIn’s 433 million users will enable Microsoft to “reinvent business processes and productivity”. He suggests that the professional profiles on LinkedIn could be streamlined into other Microsoft services such as Skype and Word, injecting information about users of its Office tools into a common news feed based on their LinkedIn network. Microsoft also said that LinkedIn would retain its “distinct brand, culture and independence”.
Wall Street’s confidence in Microsoft’s ability to pull off a gargantuan deal has been eroded by recent failures, especially the writing off of most of the Nokia purchase only a year after the acquisition. UBS software analyst Brent Thill pointed out that the company “has never done well” with past deals. Following the announcement of the deal, LinkedIn shares soared 47 per cent in New York, whereas shares in Microsoft fell 2.6 per cent. Shares in LinkedIn have fallen by more than 40 per cent this year, having dropped by a quarter in February after the issuance of a profit warning fo the first quarter and an annual loss of US$166 million. Jeff Weiner is to remain chief executive of LinkedIn, and has expressly backed the deal with the support of his co-founder and chairman Reid Hoffman.
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