Memo to Microsoft: Buying LinkedIn won't change the world

The software giant buys the social media squib, leaving everyone else scratching their heads.

by Adam Gale
Last Updated: 13 Jun 2016

A year ago, MT took a trip to Microsoft’s ‘Envisioning Centre’ at its Redmond HQ. On display were augmented reality headsets, virtual chefs that will teach you how to cook bibimbap and cultural translators that decipher menus with dishes like bibimbap on them for you. It was, as Bill Gates would put it, all pretty neat.

It’s part of new(ish) boss Satya Nadella’s plan to take Microsoft away from its boring but important Windows and Office monopolies and make it a mobile-first, cloud-first company. Like Google, Apple, Facebook and Amazon, Microsoft is trying to write the future.  

Why, then, did Nadella just take $26bn from Microsoft’s immense cash pile and buy LinkedIn? It couldn’t have been because it wants to diversify its revenue streams (LinkedIn is loss making), and if it wanted to buy a social network to compete with Facebook and get down with the kids, it would have done better to snap up Snapchat.  

The answer is perhaps that LinkedIn could integrate nicely with Microsoft’s enterprise software, essentially increasing exposure to its products across the business world. LinkedIn boss Jeff Weiner has insisted he will continue to be allowed to operate his firm independently, within Microsoft, but as Nadella presumably intends for LinkedIn to stop being a loss-making business, it’s hard to see how that would be the case.

Even if LinkedIn does become profitable under Microsoft’s aegis, $26bn is a lot of money, far too much for a long shot. Surely Microsoft, with all its world-changing ambitions, could have thought of something better to do with it? Perhaps Nadella knows something we don’t, and this will go down as the one big acquisition that Microsoft got right. But for now, no one’s convinced. Microsoft shares dipped slightly as investors shrugged their shoulders, while LinkedIn stock rose 47%. Anyone would think Nadella had overpaid...

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