Paul Liberatore

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Microsoft to buy LinkedIn for $26.2 billion in its largest deal

LinkedIn just got one heck of a professional endorsement.

The networking site for white-collar workers will be acquired by technology titan Microsoft for $26.2 billion in an all-cash deal, the companies said Monday.

LinkedIn Chief Executive Jeff Weiner will continue at the helm of the company but will report to Microsoft CEO Satya Nadella, according to a joint statement. LinkedIn will keep its "distinct brand, culture and independence," the companies said.

Over the past year, LinkedIn has been striving -- and struggling -- to grow beyond its roots as a resume-on-the-web service and become more of a daily hub for professionals, much as Facebook has become more than simply a site for sharing family photos. Steps in that direction include last year's $1.5 billion acquisition of online training site and a thorough upgrade of its mobile app.

The 13-year-old service has 433 million users worldwide. It's free to use, but charges for features such as advanced search and the ability to send messages to strangers.


After the LinkedIn acquisition closes, Microsoft's Cortana digital assistant will know your entire work history and could try to hook you up, professionally speaking.


"This relationship with Microsoft, and the combination of their cloud and LinkedIn's network, now gives us a chance to...change the way the world works," Weiner said in a statement.

The acquisition of Mountain View, California-based LinkedIn would be Microsoft's biggest ever, exceeding the $8.5 billion it paid for video-calling company Skype in 2011. For Microsoft, which is based in Redmond, Washington, the LinkedIn deal furthers its plan to become an essential provider to businesses of cloud-based services, including its Office 365.

"This combination will make it possible for new experiences such as a LinkedIn newsfeed that serves up articles based on the project you are working on and Office suggesting an expert to connect with via LinkedIn to help with a task you're trying to complete," Nadella said in an email to employees.

That is, it's a matchup between Microsoft's "corporate graph" and LinkedIn's "professional graph," he said in a conference call for investors Monday, referring to people's and companies' interconnected relationships.

"When you connect these two graphs, that's when the magic starts to happen," Nadella said.

That magic will depend on LinkedIn's "ability to transform its mapping of the 'professional graph' into a referral network, where new business is generated, and where advertisers have targeted access that cannot be achieved on other platforms," said David Friedman, president of Wealth-X, a wealth intelligence firm.

Microsoft, though, doesn't have a great track record with blockbuster acquisitions. It spent two years, for instance, trying to dig itself out from under its $7 billion takeover of Nokia's phone business.

Meanwhile, LinkedIn had good reason to put itself up for sale after the "drama" of the past year and a half, according to analysts.

LinkedIn's struggles include a "difficult sales reorg, an expensive acquisition, very disappointing annual guidance, the slow start for Sales Navigator, [and] the start-stop-start of its ad network," Evan Wilson and Tyler Parker of Pacific Crest Securities said Monday in a note to investors.

LinkedIn CEO Jeff Weiner (left) will now report to Microsoft CEO Satya Nadella (center). At right is LinkedIn co-founder Reid Hoffman.


What does Microsoft get out of the deal? Information about you and your professional contacts. "We think LinkedIn's data set is one of four unique data sets on the web: Google (intent), Facebook (demographics), Amazon (purchase history) and LinkedIn (B2B)," Wilson and Tyler said.

Analysts at Stifel Nicolaus said Monday that the only other "natural acquirer" of LinkedIn would be Google, which would find LinkedIn's assets "highly complementary" to its own cloud-based productivity tools and digital advertising business.

The boards of both LinkedIn and Microsoft have endorsed the deal, which values LinkedIn at $196 per share. That's up well from Friday's closing price of $131.08. It's also a huge jump from the 12-month low of about $101 in early February, when shares plummeted nearly 44 percent in a single day after LinkedIn warned of a dramatic slowdown in annual sales. The company also said it was discontinuing Lead Accelerator, an online advertising product it launched just last year.

"We are the same company we were a day before our earnings announcement," Weiner told employees during an all-hands meeting in February, following the plunge. "The question isn't whether or not companies are going to experience this kind of issue. The question is how companies navigate through it."

That navigation apparently included looking for safe shelter. It was at about that time the two companies began discussions "in earnest," Nadella said during a conference call Monday with investors.

Microsoft's shares fell 2.6 percent to $50.16 on Monday.

The deal is expected to close by year's end.



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