Microsoft buying LinkedIn for $26 billion

So LinkedIn is going to fall into the mitts of Microsoft. Not so much fall as shareholders of the largest self promotion business connection platform need to accept the offer of all cash at 196 Dollars a LinkedIn share. How big is this for Microsoft? At their (Microsoft) closing price of 50.14 Dollars last evening, the market capitalisation of the creator of the "Office" products was 393 billion Dollars. 26.2 billion Dollars in total. That is 6.67 percent of the Microsoft market capitalisation. Even with the 50 percent premium that they offered. I suspect that Microsoft are looking for a greater web integration into their office suite. If you think about it, and Paul often says it, the spreadsheet, email clients and editing tools such as Word have boosted productivity immeasurably. The world has changed for the better.

Not much will change on the LinkedIn front, for the time being, as per the Microsoft to acquire LinkedIn release - "LinkedIn will retain its distinct brand, culture and independence. Jeff Weiner will remain CEO of LinkedIn, reporting to Satya Nadella, CEO of Microsoft. Reid Hoffman, chairman of the board, co-founder and controlling shareholder of LinkedIn, and Weiner both fully support this transaction."

Using Office 365, the cloud and now LinkedIn, Microsoft plan to take on more business users with a wider network. As the news release shows, and to anyone who has been following LinkedIn will know, the company has been growing pretty quickly. 433 million users. What does strike me is that there are still very few job listings, only 7 million active job listings across the network over the last year, growing 101 percent year on year. I had to chuckle a little, each tech organisation recognises their own weaknesses and strengths, a sign of maturity, the announcement was uploaded via the Alphabet (Google) platform YouTube.

At the end of the day, Microsoft wants to make people more productive, connecting like minded skill-sets via the Office Suite certainly makes perfect sense. As long as that paperclip thing doesn't suggest so and so, who is constantly self promoting, right? I have already seen a little pushback, you will always get that with deals of this nature. At 59 Dollars a LinkedIn user, is this cheap for Microsoft, or expensive? This is around 8 times annual revenues, that sounds really expensive. As is human nature, people are comparing this to the Skype transaction. Microsoft bought the telecommunications company back in 2011 for 8.5 billion Dollars. Skype into LinkedIn to get researchers to solve their problems in real time in a face-to-face environment, via their Virtual Reality headsets? Not too far away I suspect, using a Amazon Alexa or Apple Siri prompt command, why not?

So whilst it seems expensive, how much more expensive would it be for Microsoft to not integrate this type of technology into their Office Suite, if they had to spend the time and effort developing something similar. And then get all the users to migrate across. You may well ask, is 59 Dollars a lot to pay for the CVs of all the professionals in the world, most of whom are all online? Not that all of them keep a great profile, we showed you Standard Bank co-CEO Sim Tshabalala's LinkedIn profile the other day, remember? Here it is - Sim Tshabalala. Seems, judging from that, he is very happy in his job, and you would hope so.



Not everybody then uses the service actively, this is a clear sign. Sim has a great job and gets paid handsomely to be on call (on behalf of the shareholders) 365 days a year, 24 hours a day, it comes with the territory. At that price of 196 Dollars a share, and with the LinkedIn management guiding in April (results presentations) to 3.30-3.40 Dollars non-GAAP earnings per share, the deal gets done at above 57 times earnings.

This is not a service that you use daily, or weekly, unless you are actively looking for a job or a job is looking for you. As the recent JOLTS report showed, the jobs are there, the skills needed to fill the jobs are lacking. What better than the most complete collection of online CVs to help solve the problem. It may seem hellishly expensive NOW for Microsoft, on a per user basis I think it is dirt cheap at the price. And will prove to be in the long run.