Is Microsoft-LinkedIn $26.2 Bn Deal Going The Nokia Way?

| January 4, 2018

You already know that Microsoft has acquired LinkedIn for a whopping $26.2 Billion. The much talked about acquisition a few years back was of Nokia. However, for obvious reasons it did not go well as the company had expected. The primary question today is that will LinkedIn acquisition turn into another Nokia chapter? There are arguments both for and against this deal. However, before going into those, you should know why the Nokia acquisition was not successful?


Why Microsoft’s Nokia acquisition was not successful?

During its Nokia deal in 2014, Microsoft had expected to foray into the smartphone segment with a bang. However, it really didn’t turn out that way as the company was not able to draw users away from Android. Though at the onset, the deal looked strategic, the monopoly of Android did not really have any room for a new player.

What Microsoft has to say about LinkedIn Deal?

Days are gone. Here comes the big announcement of LinkedIn acquisition nearly after 2 years. As everyone knows, LinkedIn is undoubtedly the leader in professional networking. There is no other network on the planet where ‘C’ suite hangs around like LinkedIn. Microsoft, on the other hand, primarily targets the same ‘C’ suite guys for the promotion of their products and services. Now, here is a clear market overlap (if not the same target market). This market overlap is what is called a ‘Natural Fit’ in business jargon. Hence the acquisition.

What the ‘opposing’ critics are saying?

The critics are not questioning the strategic advantages of Microsoft in such a deal. However, their doubts are on the ‘hefty’ price. Is it real value for money? The deal is at a 49% premium over the last week closing price of LinkedIn. The deal price is 91 times the EPS. Another argument by critics based on a historical perception of Tech sector is as follows. Tech shares have been a victim of overvalued prices several times before (do not forget the dot-com bubble). Even today, a lot many analysts feel Tech stocks are perennially overpriced for extended periods of time, and there will be corrections. Hence, ‘anti-Tech’ critics think the deal price is high.

What could be the potential future?

Even assuming that the deal price is very high, if the strategic objectives of Microsoft work out as planned, the deal could become a game changer in future. We have to wait at least another 5 years to see any outcome.

What is your feeling on this deal? Will this be a huge success or a failure? Share your views in the comments sections below.

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