$26bn is an awfully large sum of money to pay for a business, for that sort of money you’d expect to see a fairly healthy balance sheet and a significant amount of revenue being generated. That doesn’t describe LinkedIn, yet Microsoft has decided to make the business social network its latest and largest acquisition.
Given the company’s past record with large acquisitions this doesn’t sound very promising. Mostly its hard to see where Microsoft gets value from the deal.
For starters the cost per user is a mindblowing $250 – compared with Facebook’s purchase of Whatsapp at around $40 per user even more so. Does the fact that these are predominantly business users make them more than six times as valuable? I’m not convinced.
Microsoft must believe that the LinkedIn product will slot into its ecosystem and provide some value – but what that is and where it fits isn’t obvious.Satya Nadella painted the deal as bringing together the professional cloud and the professional network. By knowing the links between individuals Microsoft apparently believes that it will be able to better sell them cloud services.
Past history has shown that Microsoft fails with about two in three of its big acquisitions and this one doesn’t feel like it will have us singing Nadella’s praises in a couple of years when it all shakes out. Best case scenario is that Microsoft leaves LinkedIn to its own devices and provides the corporate muscle to allow it to turn a profit.
It’s a fairly limited view of success, but judged on the Kin, aQuantive and Nokia deals it would be a success nonetheless.