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

Tue Jun 14, 2016 4:20am EDT
 
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By Sarah McBride

(Reuters) - Microsoft Corp will buy LinkedIn Corp for $26.2 billion in its biggest-ever deal, a bold stroke by Microsoft CEO Satya Nadella in his efforts to make the venerable software company a major force in next-generation computing.

By connecting widely used software like Microsoft Word and PowerPoint with LinkedIn's network of 433 million professionals, the combination could enable Microsoft to add a suite of sales, marketing and recruiting services to its core business products and potentially challenge cloud software rivals such as Salesforce.com Inc..

"LinkedIn and Microsoft really share a mission" of helping people work more efficiently, said Microsoft CEO Nadella in a conference call with analysts. "There is no better way to realize that mission than to connect the world's professionals."

The $196-per-share price tag represented a premium of almost 50 percent over LinkedIn's stock market value as of Friday, but was still well below the social media company's all-time high of $270. Analysts said the price was rich, and Microsoft's stock closed down 2.7 percent at $50.14.

Still, there was cautious optimism that this could be one of the relatively few tech mega-mergers that works out well. "It's a massive growth play for Microsoft," said Forrester analyst Ted Schadler.

The deal may also help spur further mergers and acquisitions in the tech sector, where a broad correction is bringing down the prices of public and private companies even as a handful of major players sit on large cash piles.

For LinkedIn, founded in 2002 and launched the following year by Reid Hoffman, one of Silicon Valley's most-visible investors and entrepreneurs, the sale marks the end of a classic startup run: funding from top-tier venture capitalists, a long period of building the company and developing a revenue base, then a big initial public offering, followed by a roller-coaster stock price and finally an acquisition.

The company makes most of its $3 billion in annual revenue from job hunters and recruiters who pay a monthly fee to post resumes and connect with people on what's often known as the social network for business.   Continued...

 
A Microsoft logo is seen on an office building in New York City in this July 28, 2015 file photo. Microsoft Corp announced more big cuts to its smartphone business on Wednesday.  REUTERS/Mike Segar/Files