What can we learn from the LinkedIn Acquisition?
It happens all the time: a company’s stock prices and yearly income are starting to take a downturn. Out of nowhere, a bigger company will swoop in with a merger deal, and the next thing you know, that service or product you enjoyed so much is a little bit… different.
Acquisitions have always been a part of business, and the bigger your brand name, the more eyes are going to be on your transactions. Case in point: on June 13th, Microsoft bought out LinkedIn, the social media network geared towards business professionals. The deal was approved by the boards of both companies, and is expected to close by the end of the year.
As with most acquisitions, one of the main questions on everyone’s mind is how the acquisition will affect the company being purchased. Most often, the main difference will lie in the company’s potential for growth and long-term outlook, but when it comes to online entities like LinkedIn, the average person is a lot more concerned with how it will affect the user interface.
This is especially pertinent after Google’s acquisition of Nest, and the subsequent termination of the Revolv. While LinkedIn and Microsoft agree that their company philosophies match up, Microsoft is taking the cautious route and letting LinkedIn operate independently.
With Microsoft’s turbulent acquisition history, Moody’s Investors Service even placed Microsoft’s Triple-A credit rating under review, since a bad acquisition could result in a downgrade. Right now, Microsoft remains stable, but it’s hard to predict how a merger will turn out.
Acquisitions almost always help out the company being acquired, but what value must they contain in order to be profitable for the purchasing company? Image courtesy of hbr.org
But even if Microsoft has had some bad bumps, there’s no reason to start getting negative just yet. As it turns out, Microsoft has been more or less courting LinkedIn for about a decade. There have been a number of talks over the past few years regarding a business deal between LinkedIn and Microsoft, but they just never seemed to bear any fruit. Last year, however, disappointing earnings caused LinkedIn’s company shares to drop in value. Making the jump to Microsoft, which boasts a hefty $100 billion in cash and short term investment, is a smart choice for a company looking to keep their business afloat.
And it’s not just LinkedIn who stands to gain from this merger. Since he took over as chief executive officer in February, Satya Nadella has been working hard to pull Microsoft out of its technological slump. So far, he’s extended the reach Microsoft’s software onto out of system platforms, such as Android phones and the Linux OS, and he’s got big plans for LinkedIn.
In a recent New York Times interview, Nadella said:
“This deal is all about bringing together the professional cloud and professional network… The LinkedIn team has grown a fantastic business centered on connecting the world’s 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 organization on the planet.”
LinkedIn itself doesn’t look like it will be changing much, but Microsoft does intend to integrate it with its current productivity and business software. Other theories regarding just why Microsoft wants LinkedIn so badly have been suggested, including B2B online marketing purposes and training Cortana, Microsoft’s voice-based AI, in business trends and consumer behavior.
As you all know, here at Deep Core Data, we’re pretty excited about machine learning, and while a business based AI might not be as fun as the Cortana from the Halo video game series, this could instigate a huge change in the way we operate businesses.
Right now, however, LinkedIn’s search engine is not particularly robust. While the website is a large repository of text based information, it’s not fully tagged and categorized, which makes it almost useless for teaching anything, let along business to a computer. Luckily, Microsoft has plenty of experience with refining search engine technology. Bing may not be highly regarded, but it’s still the second most popular search engine on the internet.
If Microsoft gives the LinkedIn search engine the tune-up it needs, something that will benefit users just as much as developers, it might not be long before Cortana is making our business decisions for us.