LinkedIn Acquisition Offers a Second Life for Microsoft

From Paul Mampilly: Five years ago, Microsoft Corporation (NASDAQ:MSFT) was the laughingstock of the computer world. Apple’s iPhone, iPad and Mac computers were selling like hotcakes. The latest version of its Windows software system was so awful no one would buy it.

Microsoft’s Bing search engine — which it had invested billions in — was struggling against Google.

Despite generating billions of dollars in cash flow every quarter and billions more in the bank, people were openly questioning if Microsoft had a future. Clients would ask me at meetings if they should sell their Microsoft stock at prices that were crazy low.

But then, Microsoft accepted the problem. The PC boom era that had made Microsoft its billions was over. It was time for a new direction.

Microsoft founder Bill Gates got involved and began to make people take responsibility for the knuckleheaded decisions of the previous 10 years.

In August 2013, Microsoft realized that it needed new leadership. CEO Steve Ballmer stepped down, and shares of Microsoft soared nearly 10% on the news … a good sign.

And from there, Microsoft realized its next leader would need to make changes, have a new vision and not just come in to fix the problems created during Ballmer’s tenure.

Satya Nadella was named the new CEO in February 2014, and he brought with him a new vision for the company.

LinkedIn: A Second Life for Microsoft

Nadella has been great for Microsoft’s stock. Since he was appointed, the shares have rallied 65% and haven’t looked back.

Recently, Nadella made the decision to buy LinkedIn, the professional networking site with 433 million users for $26.2 billion. That’s the biggest deal ever by Microsoft, and this is an organization that has done 196 deals in its lifetime — including lots of disastrous ones such as buying Nokia in 2007 for $7.2 billion.

One thing that I like to look at when I hear about a big acquisition is the market’s reaction. My experience is that the market’s reaction gives you a heads-up if the acquisition is going to be a good one. In this case, Microsoft stock has jumped 13% since the announcement.

That’s one check in Microsoft and Nadella’s favor.

If you’re a recruiter today, the first thing you do is check a person’s LinkedIn profile. Same when you do business with a person for the first time.

Not only that, LinkedIn has the information on how you connect to your network and how they connect to you.

And for me, this is the real reason Microsoft bought LinkedIn.

LinkedIn possesses an incredible amount of data regarding professional networks that it has been collecting since it began in 2002. That data can be used to generate incredibly valuable information, which can be incredibly useful to businesses. It can help pinpoint business trends, buying habits and potential buyers of products.

Nadella is remaking Microsoft for the post-PC era of computing, and the key to it is data and information. The more data you have, the better information you’re going to get out of it through the use of algorithms and pattern searching.

Nadella’s buy of LinkedIn marked the moment it became 100% clear that Microsoft was on the path to its second life and accepting that the PC era is over.

The New Era of Computing

In the next decade, Microsoft, through LinkedIn and more acquisitions, is going to become a company that benefits from this new data/information era of computing.
Some people believe that Microsoft overpaid for LinkedIn, but they are dead wrong.

These are the same folks who told you that Facebook overpaid when it bought Instagram for $1 billion. Or when Facebook bought WhatsApp for $19 billion.

Today, both those buys are seen as genius moves. And I believe that’ll be the same for Microsoft and LinkedIn in two to three years.

This new era of data/information is the key factor in the Internet of Things mega trend that I’ve written to you about before. And Microsoft’s purchase of LinkedIn is a powerful signal of how critical it is to find a way to participate in it.


Microsoft shares fell to $57.46 in premarket trading Friday, down $0.14 (-0.24%). MSFT has gained about 3.8% since the start of 2016, trailing the S&P 500’s 7% rise in the same period.

This article is brought to you courtesy of The Sovereign Investor.

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