The announcement this week that Microsoft is paying $26.2 billion to acquire LinkedIn has drawn plenty of interest and commentary, much of it focused on Microsoft’s move to the cloud.
But social media expert Paul Gillin sees the move as all about the data, an opinion shared earlier this week with Information Management by Doug Laney, vice president and distinguished analyst in the Chief Data Officer Research and Advisory Group
Gillin’s immediate reaction to the news was more about the fate of LinkedIn itself, however.
“I was sorry LinkedIn couldn’t make it on its own,” Gillin notes. “It had most of the makings of a dominant franchise – great market share, unique value, enthusiastic customers – but it lacked a sustainable business model. Being a public company was not doing LinkedIn any favors as it tried to stabilize its business.”
Much has been written this week in the tech media about the whopping price tag that Microsoft is paying to acquire LinkedIn – the largest investment ever by Microsoft, and one of the largest acquisitions in the industry’s history. But Gillin clearly sees the value to be had in the deal.
“The LinkedIn user database is an enormously valuable asset,” Gillin stresses. “LinkedIn has chosen never to license it, which only enhances its value. Microsoft is jealous of Salesforce.com’s $56 billion market cap, and this gives it an edge in building its CRM business that Salesforce can’t match.”
As to who benefits the most from the deal, and what are the greatest risks, Gillin has several thoughts.
“The deal is a home run for LinkedIn, which sells out for a 50 percent premium over its stock price and nine times annual sales,” Gillin explains. “Considering that its business was struggling, this is a very nice exit.”
“The prospect of combining LinkedIn’s database with Microsoft’s productivity and collaboration tools has a lot of interesting possibilities,” Gillin says. “The trick will be to do it without violating the trust LinkedIn has built with its members. If the net effect is to spam people, then this deal with backfire.”
As to Microsoft, “What makes the least sense is the timing,” Gillin notes. “Microsoft is in the middle of a huge business turnaround right now. An acquisition of this size could be a distraction they don’t need. I hope the integration goes smoothly.”
Finally, Gillin says he does not expect significant changes to the experience that LinkedIn members are now receiving from the site.
“Microsoft is buying in to LinkedIn’s value. It would be foolish to start micro-managing a members model that has been enormously successful for 14 years,” Gillin concludes.
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