Microsoft acquiring LinkedIn might seem like a crazy idea at first: Why would an enterprise software company pay $26.2 billion for a professional social network? The two business don't appear to have much in common at all.
But Microsoft Corp. (Nasdaq: MSFT) and LinkedIn Corp. are companies in transition. Microsoft is well under way making the transformation from software to the cloud, while LinkedIn wants to be about more than "friending" and headhunting -- it wants to leverage the cloud to become the world's best resource for career advancement, sales and recruitment. The two companies are betting they can achieve those goals together.
The combination of Microsoft and LinkedIn is a marriage that brings baggage to the altar. LinkedIn boasts more than 433 million members worldwide but has yet to convert scale into profits. And Microsoft, meanwhile, is scrambling to convert its dwindling legacy on-premises enterprise software business to the cloud. (See Microsoft Nabs LinkedIn for $26.2B.)
Microsoft wants LinkedIn's enormous wealth of information about individuals' current jobs, work history and professional relationships -- information that you and I have input into our LinkedIn profiles -- along with LinkedIn's rich company profiles. Microsoft wants to integrate that information into its Office 365 cloud productivity suite as well as its Dynamics CRM application. Microsoft also values LinkedIn's Lynda cloud-based education and training service, which LinkedIn acquired for $1.5 billion early last year. Much of the Lynda curriculum is devoted to helping IT staff get professional training on Microsoft products and services.
For LinkedIn's part: In an open letter to employees announcing the sale Monday, LinkedIn CEO Jeff Weiner describes his vision for the social network. He wants LinkedIn to be the destination where companies find their next employee, workers find their next job, and get training for that position. LinkedIn also wants to enable sales.
But more than that: LinkedIn looks to "connect the world's professionals to make them more productive and successful, and ... create economic opportunity for every member of the global workforce," Weiner says.
As revealed in that letter, Weiner's vision is messianic. He notes that robots and drones are replacing workers now, and sees LinkedIn as a force for creating new opportunities.
Remember that dystopian view of the future in which technology displaces millions of people from their jobs? It's happening. In the last three weeks alone, Foxconn announced it will replace 60,000 factory workers with robots, a former CEO of McDonald's said given rising wages, the same would happen throughout their franchises, Walmart announced plans to start testing drones in its warehouses, and Elon Musk predicted fully autonomous car technology would arrive within two years.
Whether it's worker displacement, the skills gap, youth unemployment, or socio-economic stratification, the impact on society will be staggering. I've said it on multiple occasions and believe it even more so every day: creating economic opportunity will be the defining issue of our time. That's why I'm here and why I can't imagine doing any other job. Simply put, what we do matters, and matters more than ever.
And all of that is right up Microsoft's alley.
Microsoft CEO Satya Nadella said in an open letter to employees announcing the acquisition: "In essence, we can reinvent ways to make professionals more productive while at the same time reinventing selling, marketing and talent management business processes."
LinkedIn will "retain its distinct brand and independence, as well as their culture which is very much aligned with ours," Nadella says. "Jeff will continue to be CEO of LinkedIn, he'll report to me and join our senior leadership team." Weiner will decide where it makes sense to integrate the two companies: He compares the integration to the independent structure enjoyed by YouTube Inc. inside Google (Nasdaq: GOOG), and by WhatsApp and Instagram inside Facebook .
But while LinkedIn might retain its identity and independence, there's a lot of application and platform integration planned once the acquisition closes (due this calendar year).
Next page: Key areas of integration