The purchase of LinkedIn makes no business sense its ship sailed long ago
There is something irresistibly comical about the spectacle of two CEOs announcing a friendly takeover. The two chaps (for they are still generally chaps) stand side by side, grinning into the cameras. The proud new owner explains what a great outfit his latest acquisition is, how pleased he is with the deal, extols the synergies that will magically materialise once the marriage is consummated and expresses his undying admiration for the poor schmuck who is now his latest subordinate.
The schmuck, for his part, declares his undying admiration for his new boss and his deep respect for the gigantic organisation into whose maw he is about to disappear. He, too, is incredibly excited by the new horizons that are now open to him and his colleagues. The marriage is a very good deal for both organisations a win-win outcome no less. The fact that he omits to mention how much he has personally made from the deal is tactfully overlooked by his admiring media audience.
Last weeks announcement of Microsofts acquisition of LinkedIn followed this script to the letter. The Redmond giant paid $26.2bn in cash for the business-oriented social networking service that had fallen on hard times. Its growth rate had dramatically slowed, it makes no profits and less than a quarter of its 433 million members visit it once a month. It is, as theFinancial Timessniffily declared, a fixer-upper in an iffy neighbourhood of the internet.
Spot on. As a manic deployer of clueless algorithms, LinkedIn is possibly the most annoying social networking service in the world. I was once a member, not because I was looking for a job but because of a naive belief that anyone who writes about this stuff should use it. But when I started to receive messages saying that complete strangers had endorsed me for qualities for which I had sought no endorsement whatsoever, I deleted my account. That was in 2012. I am still receiving emails from people on LinkedIn inviting me to connect with them.
What on earth possessed Microsoft to lay out $26bn for this turkey? At the announcement, Microsofts CEO, Satya Nadella, enthused about the competitive advantage he expects the network to provide for Microsoft. The LinkedIn team has grown a fantastic business, he burbled, centred on connecting the worlds professionals. Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organisation on the planet.
Oh yeah? And pigs might also fly in close formation.
One reason for Microsoft buying LinkedIn is simply that it could. The company is sitting on a $100bn cash pile and has to do something with it. Microsoft is a large, stable and profitable company and is likely to remain so for a long time. Although its operating system and office software products are, in one sense, legacy businesses, they continue to be profitable because a majority of the worlds business organisations and governments have standardised on them, and that addiction isnt going to end soon. And Microsoft has built an impressive cloud computing business. So while the $26bn paid for LinkedIn isnt exactly loose change, theres plenty more where that came from.
Read more: http://www.theguardian.com/us