15 June 2016

Beware Those Who Don't Get the Microsoft-LinkedIn Deal

The graphic accompanying the announcement of the Microsoft/LinkedIn deal showed the World's leading professional Cloud and the World's leading professional Network collaborating to create a more connected, intelligent and productive experience.

However, post announcement analysis includes a number of nay-sayers. 

Peter Bright of ARS Technica wrote, "I’ve slept on it—I’m still baffled at Microsoft buying LinkedIn for US$26.2B. Microsoft is buying the cow when all it wants is some milk." He goes on to reflect upon the dismal record of other Microsoft purchases and the dismal performance (GAAP) of LinkedIn.

There are other similar opinions being expressed. Perhaps they have missed the fact the world has changed. Acquisitions in the emerging digital economy have little to do with GAAP or other legacy paradigms and much to do with time to market, cost of acquisition and the need to improve the experience or gain the trust of those who can be served.

The Canadian acquisition of Wind Mobile by Shaw late last year was puzzling to some analysts who examined the free cash flow of some 940,000 Wind subscribers (CA$18/mth) against the CA$1.6 billion cost of acquisition (CA$1,700+/subscriber). Perhaps they missed Shaw's need for a fast tactical and strategic realignment to the small screen. History will likely prove Shaw's acquisition was also a sound financial decision since acquiring subscribers exhausts time and resources like no other business investment.

Earlier today a comment about the Microsoft deal on the Harvard Business Review forum provided a different view. Doug Laney, VP and Distinguished Analyst, Chief Data Officer Research and Advisory, Gartner, suggests Microsoft may have stolen LinkedIn. At $26.2B or US$60.51/user Microsoft is paying less than investors valued both Facebook ($80.95/user) and Twitter ($101.70/user) at the time of their IPOs.

Other information appearing around the Microsoft/LinkedIn transaction provide clues about sources of revenue as well as the size and characteristics of LinkedIn's subscriber base: 433 million users on record, 105 million active members and 2 million paid subscribers. 

Investors should be cautious with financial advisers who don't understand this deal. The information available from LinkedIn may be a useful resource to model and evaluate other emerging networks they find interesting. 

We expect there will still be a strong return on investment and much opportunity for both Microsoft and LinkedIn to explore as they move forward.

About Executive Producer, Larry R. Evans:
Larry Evans is a futurist, a brand developer and a collaboration advocate. He is Principal of The Paradigm Corporation, which is headquartered at Thunder Ridge just outside Crossfield, Alberta, Canada. He is known for bringing a unique and predictive lens to paradigm shifts during a career that spans 45 years. Now from his wheel chair, he brings a grounded, tenacious view of brand, client rights and trusted relationships for the digital age. His perspective and values influence his life, business and ministry.

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