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Microsoft’s LinkedIn gambit needs hard work and luck

editorials Updated: Jun 14, 2016 17:01 IST
Hindustan Times

Are they really connected on LinkedIn? Jeff Weiner, chief executive of LinkedIn; Satya Nadella, CEO of Microsoft; and Reid Hoffman, a founder of LinkedIn.(NYT)

In the roller-coaster world of global capitalism and Wall Street adventures, mergers are more often than not questionable successes. But there is something to be said about the audacity and clarity that Microsoft CEO Satya Nadella has displayed in moving to buy the professional networking portal company, LinkedIn. This is the software giant’s biggest acquisition yet. Given his Hyderabad roots, Mr Nadella proves wrong the belief that Indian techies have a poor risk appetite. The $26-billion deal is significant because it takes Microsoft deeper into the Internet, away from its roots as a desktop-era story in the 1980s and 1990s which it dominated, first with its DOS operating system in partnership with IBM and later with a killer combination of the Windows platform and its Office productivity suite that includes the commonplace Power Point, Word and Excel applications.

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In those times, Microsoft profited from licence fees on its software. Now, these very products are rentable on the Internet, offering subscription revenue that can recur every month. LinkedIn is a strategic fit from that point of view because its 433 million users, 35 million of whom are in India, are businesses and professionals who can potentially become Microsoft’s premium customers for a variety of applications and services including online storage. Office already has 1.2 billion customers. LinkedIn will maintain its independent identity, but can also help small businesses, Microsoft’s established patrons, recruit and collaborate easily over the Web.

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However, there are ifs and buts all along the way. Microsoft has made nearly 200 acquisitions, big and small, over the past decade. Among the biggest of them, Internet calling firm Skype, employee networking site Yammer and Nokia’s mobile phone unit are not significant successes. The LinkedIn acquisition only strengthens Microsoft’s old territories by enabling social businesses, whereas the consumer Internet is dominated by search giant Google and social network Facebook, who between them control nearly 65% of online advertising revenues in the prime US market. Microsoft must work hard to truly exploit the apparent advantages of linking up with LinkedIn. Or else Wall Street might unfriend Nadella. The collaborative Web is a cloudy affair.

First Published: Jun 14, 2016 16:15 IST