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Microsoft-LinkedIn - How will it impact customers, competitors and partners?

James Henderson (ARN) | June 16, 2016
Top three questions answered as Redmond prepares to acquire social media giant.

With the dust slowly settling on one of the biggest technology acquisitions of the year, eyes are now slowly turning away from Redmond, as the industry sizes up the long-lasting effects of the multi-billion dollar deal.

As reported by ARN, the $US26.2 billion deal represents a marriage of business services in a Cloud-focused economy, an acquisition of professional convenience.

But as the world awaits how Microsoft will utilise LinkedIn within the competitive marketplace, likewise it ponders on its wider-reaching impact, on customers, competitors and partners.

History shows that there have been few blockbuster acquisitions on this scale outside the professional services arena.

HP acquired Electronic Data Systems for $US13.9 billion, but never gained the synergies sought, and is now in the process of spinning out its Hewlett Packard Enterprise Services group to CSC for $6.9 billion.

From memory, the only other blockbuster acquisition that comes close is the $US19 billion acquisition of WhatsApp by Facebook, which provided the basis for Facebook Messenger, its mobile messaging platform.

Relative to Redmond dealings, Microsoft previously spent $US9.4 billion to purchase of Nokia's mobile phone business, most of which the company has written off and the company also acquired Skype, the voice and video chat provider, for $US8.5 billion in 2011, alongside $2.5 billion in 2014 for Mojang AB, the developer of the "Minecraft" game.

While LinkedIn will operate as a stand-alone business, it offers Microsoft three new services lines it can sell to enterprises: talent management; learning management and marketing, creating a knock-on effect for market across the world.

"Over the last several years, Microsoft has awoken to the revenue potential inherent in understanding people - either through its own experience gained by selling cloud services or by seeing the explosive revenue growth of firms like Facebook who directly monetise the social graph of their members," Technology Business Research Vice President, Stuart Williams, said.

As reported by ARN, the announced LinkedIn acquisition is all about the data - the professional social graph data - volunteered by members and captured by LinkedIn.

Data, especially validated data about individuals, is increasingly more valuable than the applications through which people work.

"Microsoft offers LinkedIn new routes to market and monetisation opportunities for the data," Williams said. "The market forces driving the deal also compelled IBM to acquire the Weather Company, and for many competitors to partner with Facebook."

Williams said Microsoft can use the social graph data to add value across its productivity, search, advertising and business software portfolio.

However, it's biggest risk is in maintaining the good will of the membership.

"So long as members see the value of engagement, they will return, contribute and participate with others," Williams added.


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