News

Amid Skepticism, Execs Make Case for Microsoft-LinkedIn Deal

• By Jeffrey Schwartz
• June 14, 2016

Microsoft's announcement on Monday of its planned $26.2 billion acquisition of professional social network LinkedIn has left many industry watchers scratching their heads.

Initial reaction to the deal has been mixed so far. Some industry watchers believe the acquisition can transform Microsoft positively, but others have pointed out that most deals of this scale rarely live up to their promise.

"There's no reason to believe the LinkedIn deal cannot work. I just think it may take a long time and it may not produce the earnings leverage Microsoft shareholders deserve for a $26 billion deal," Roger McNamee,  a co-founder of venture capital firm Elevation Partners, told CNBC in an interview after the deal's announcement.

McNamee stopped short of telling CNBC that the acquisition would fail, but he emphasized his skepticism. "It's really simple. Big deals don't work," he said. "These things are sold, not bought. From Microsoft's point of view, they have to pay attention to the fact that LinkedIn has never been a particularly profitable company, and their focus on job boards and hiring and all of that has shifted the value proposition in a way that I do think limits their ability to integrate it [with] Microsoft's enterprise suite. It's not to say they can't do it. It will take real work, and I think quite a lot of time."

In a conference call with investors Monday, top executives from both Microsoft and LinkedIn made the case for Microsoft's largest acquisition to date. Microsoft CEO Satya Nadella and LinkedIn CEO Jeff Weiner described a vision that entails bringing the LinkedIn experience into all components of Microsoft's Office 365 and Dynamics products. They also described bolstering key Microsoft tools ranging from Cortana, Azure Machine Learning and Active Directory with LinkedIn news feeds, courseware and profiles.

"When we talk about Microsoft's mission, we talk about empowering every person and every organization on the planet to achieve more. There is no better way to realize that mission than to connect the world's professionals to make them more productive and successful. That's really what this acquisition is about," Nadella said.

While LinkedIn will retain its separate brand and organizational structure, the two companies plan to deeply integrate their respective platforms in ways that will extend the use of their products and services. Nadella and Weiner spoke broadly about plans to tap into each company's respective artificial intelligence (AI) capabilities -- the Microsoft Graph and the LinkedIn Graph -- to create what Weiner described as an "economic graph."

"When you combine the Microsoft Graph with LinkedIn's professional graph, we think we are going to be able to take a very substantial leap forward in terms of the realization of our vision, which is creating economic opportunity for every member of the global workforce," Weiner said.

That plan focuses on providing digital representations of profiles, skills, hiring and learning, according to Weiner.

"The goal is to step back and to allow all forms of capital -- intellectual capital, working capital and human capital -- to pull it where it can best be levered, and in so doing transform the global economy," he said. "We believe we will be better positioned to make this possible."

The idea, according to Nadella, is to enable a professional working on a project to tap information from LinkedIn users' news feeds and activities of those in their social networks to improve workflows and provide better access to information.