Microsoft is buying LinkedIn for $26.2 billion, a deal in which one of the world's biggest social networks will join a software and computing giant as it tries to broaden its reach in online services.
Under the agreement the two companies announced Monday, LinkedIn will continue to operate independently, and LinkedIn chief executive Jeff Weiner will report to Microsoft chief executive Satya Nadella. The deal with Microsoft values each of LinkedIn's shares at $196; LinkedIn's stock was up nearly 47 percent at the end of Monday trading.
The two companies cater to similar customers. Under Nadella's tenure, Microsoft has sought to become a cloud-computing powerhouse that largely serves businesses. LinkedIn also primarily targets professionals and is the United States' 11th-largest website by traffic and visitors, according to the online index Alexa. In a sign of LinkedIn's importance to corporations, executives have been known to publish blog posts on the platform that act as corporate statements.
Monday's deal will allow Microsoft to infuse its professional software and services with LinkedIn's technology, a move that could give users of Windows, Microsoft Office and even the company's personal assistant, Cortana, access to new features and elevate Microsoft's suite of enterprise products. Meanwhile, by tapping into Microsoft Office's user base of 1.2 billion people, LinkedIn hopes to become a central player in many companies' day-to-day business, increasing engagement with the platform.
"Today's an exciting day," Nadella said on an investor call Monday. "It's the bringing together of the world's professional cloud and the world's professional network."
LinkedIn is a major brand name with 433 million users and $3 billion a year in revenue, according to a company-wide email that Weiner sent to staff. Still, recent estimates suggest only a fraction of LinkedIn's users log in on a monthly basis — highlighting the challenge ahead for Microsoft and LinkedIn as they try to grow the social network.
The coming integration could mean someday opening up a contact in your address book and seeing that person's LinkedIn profile in addition to his or her phone number and email address. Or the calendar application suggesting other attendees for your next meeting based on the degrees of separation between them and you. Microsoft ultimately envisions LinkedIn profiles acting as a kind of unified, universal contact template.
That centralized approach will also enable some of Microsoft's newest cloud-based technologies to become more intelligent, according to an investor presentation released Monday as part of the announcement. In the future, Cortana, Microsoft's digital personal assistant, could provide context about a business acquaintance's background using LinkedIn's database.
"Assimilating the information hosted on LinkedIn in personal assistant Cortana promises to boost the value it offers to users, helping take the value of Microsoft’s AI to the next level," said Linda Sullivan, a partner at Cavendish Corporate Finance. Microsoft may also capitalize on Lynda.com — a LinkedIn-owned website offering online courses on everything from big data to design and marketing — to become a leader in professional development, she added.
Weiner said he sees an opportunity to expand the role of LinkedIn-driven advertising on Microsoft platforms. Businesses that currently work with LinkedIn to produce "sponsored content" could someday receive "the ability to reach Microsoft users anywhere across the Microsoft ecosystem," said Weiner, expanding the number of people who could be exposed to that advertising and increasing ad revenue.
Some analysts said that although the acquisition could help Microsoft solidify its position in social media, it risks changing LinkedIn's reputation as a fully independent platform.
"There will be LinkedIn users that are not keen to become sucked into the Microsoft ecosystem as part of their social collaboration activities," said Dan Bieler, a principal analyst at Forrester Research.
In addition, Microsoft's weakness in mobile technology could hurt the partnership at a time when many consumers are increasingly shifting their work and play to handheld devices, Bieler said. Earlier this year, Microsoft said it would exit the mobile phone business by selling its Nokia handset business to Foxconn and by signaling that Microsoft would stop selling its own smartphones. But about 60 percent of LinkedIn's traffic comes from mobile, according to Weiner.
The deal is one of the biggest in Microsoft's history. But it isn't the first time the software giant has tried to leap into social networking. In 2012, the company bought Yammer for $1.2 billion and folded it into Microsoft Office. But critics of the deal have said that Microsoft has been slow to integrate Yammer into its core business.
Microsoft's acquisition of LinkedIn is subject to regulatory approval and is expected to close by the end of the year.