Keywords: Why Microsoft Went All In on LinkedIn -- WSJ
15 June 2016 - 5:03PM
Dow Jones News
By Christopher Mims
Microsoft Corp.'s planned acquisition of LinkedIn Corp.
potentially is a very savvy move, though you would be hard-pressed
to discern that.
There are lots of reasons for skepticism. The price tag, for
one. At $26.2 billion, it is by far Microsoft's largest acquisition
ever. The size alone is a reason for caution, given the sorry
history of such large deals.
Then, there is Microsoft's own checkered history with
acquisitions. It has recorded write-downs exceeding the $9.4
billion it paid for the handset unit of Nokia Corp. in 2014.
Earlier deals for Skype Technologies and Yammer Inc., designed to
bolster Microsoft's digital and social credentials, did little of
either.
But this deal can succeed where the others failed.
Here's why.
There is real synergy between the companies and their products,
particularly Microsoft's Office productivity suite -- now delivered
primarily online -- and LinkedIn's core database of more than 400
million mostly professional profiles.
As Microsoft Chief Executive Satya Nadella told The Wall Street
Journal, "It's really the coming together of the professional cloud
and the professional network." In other words, we now work by
toggling between our productivity software and our social networks.
But why should the two be separate?
Mr. Nadella is betting that were these two concepts reconceived
today, they would be one.
LinkedIn's users are, arguably, Microsoft's core demographic.
They also offer Microsoft something it has long sought but never
had -- a network with which users identify. Microsoft needs to
persuade LinkedIn users to adopt that identity, and use it across
as many Microsoft products as possible.
Access to those users, as well as the enormous amounts of data
they throw off, could yield insights and products within Microsoft
that allow it to monetize its investment in LinkedIn in ways that
the professional networking site might not be able to. Mr. Nadella
already has mentioned a few of these, including going into a sales
meeting armed with the bios of participants, and getting a feed of
potential experts from LinkedIn whenever Office notices you're
working on a relevant task.
LinkedIn also could supercharge Microsoft's Customer
Relationship Management (CRM) software, used to identify and track
sales leads. Microsoft is in fourth place in market share among the
large CRM players, including Salesforce.com Inc., SAP SE and Oracle
Corp.
Salesforce is the market leader, but it holds a minority of the
complex and sometimes ill-defined market.
LinkedIn already has its own CRM-type product, LinkedIn Sales
Navigator, but more important, it has the data and reach that any
CRM company would covet.
If CRM is ultimately about managing relationships, what better
vehicle for that than an existing social network with its built-in
insight about who is connected to whom?
LinkedIn shares fell by nearly half in a single day in February
when the company issued a gloomy sales outlook. Michael Wade,
professor of innovation and strategy at Switzerland-based business
school IMD, says the company hasn't lived up to its potential for a
while.
Mr. Wade says LinkedIn hasn't evolved quickly enough beyond its
roots as a recruiting tool and job-search site. Most of its users
aren't looking for a job, and LinkedIn has so far done a poor job
of getting them to come back to the site regularly to connect with
and expand their professional networks. Only about one quarter of
LinkedIn's 400 million "cumulative" users return to the site every
month.
That brings us to perhaps the biggest reason why the deal may
succeed: Mr. Nadella. Put bluntly, Microsoft today is a very
different company than the one that acquired Nokia, Skype or
Yammer. Under Mr. Nadella's predecessor, Steve Ballmer, Microsoft
sought to drive users to its platforms, primarily Windows.
As a corollary, that meant that acquisitions were quickly
integrated with other Microsoft products and development of new
features slowed.
Mr. Nadella has shown a willingness to meet users where they
are, even if that is devices running Apple Inc.'s iOS or Alphabet
Inc.'s Android mobile operating systems. On Monday, Mr. Nadella
said LinkedIn will be allowed significant autonomy, similar to
Microsoft's handling of Minecraft maker Mojang.
That would mean walking a fine line between autonomy and
synergy. The longer the rope that Mr. Nadella gives LinkedIn CEO
Jeff Weiner, the less benefit there may be to Microsoft's
products.
But don't bet against him. If Mr. Nadella can re-energize an
organization as big and legacy-bound as Microsoft, who is to say he
can't do the same for 13-year-old LinkedIn.
Write to Christopher Mims at christopher.mims@wsj.com
(END) Dow Jones Newswires
June 15, 2016 02:48 ET (06:48 GMT)
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