When Microsoft shelled out $26 billion on the acquisition of professional networking website LinkedIn many people thought the price was way too expensive. This is a company which was struggling when Microsoft stepped forward amid concerns that growth had peaked and competition was having an impact. However, Amy Hood, executive vice president and chief financial officer of Microsoft Corporation, has some ambitious plans for the company.
Eventual integration into Microsoft
Interestingly, Microsoft seems to be more focused on growing the topline revenue and building business streams for the LinkedIn acquisition rather than the process of integrating into Microsoft. There is no mention of driving profitability, no mention of streamlining the cost base but just a 100% focus on driving revenue growth. The idea is that as revenue growth increases then eventually profits will follow as the company’s profile and activity rise.
It would be foolish to suggest that Microsoft will not leverage its own services and experience to quicken the pace of growth at LinkedIn but it seems the company is more than happy to focus on growing the business as opposed to integrating.
Leveraging the salesforce
As we touched on above, while LinkedIn will be left to its own devices under its current board of directors the service will be integrated into Microsoft products such as Office 365. This is where we will see the real benefit of the acquisition and while competitors may cry wolf they have been integrating their own acquisitions into their own services for many years. Microsoft has gone through the mill over the last decade or so with politicians trying to reduce the company’s influence and break up the group.
The acquisition of LinkedIn would seem to be the start of a new growth phase for Microsoft which has too often been behind the curve and behind competitors such as Google. Amy Hood has already confirmed that funds will be invested into LinkedIn to quicken the pace of growth but she is very keen to ensure that every dollar creates a return on investment. She is more than happy that many in Microsoft, and LinkedIn, will believe she could invest more because that is her job. Counting the dollars and creating a return on investment which Microsoft so sorely needs.
Is LinkedIn different to other networking sites?
LinkedIn very often gets grouped with social media sites such as Facebook when in reality it is very different because it targets the professional arena. The ability for professionals to integrate with each other and utilise services offered by the LinkedIn website is there for all to see. We will no doubt see an array of new paid for services emerge in the weeks and months ahead although there are unlikely to be any major changes in the foreseeable future. There was a general opinion that LinkedIn was losing its way as an independent operation and hopefully the know-how, the experience and the finances of Microsoft will help turn it round.
It may have seemed a relatively expensive acquisition at the time but if Microsoft can reinvigorate revenue growth at LinkedIn and ultimately create a growing profit line then the $26 billion acquisition price will look like money well spent.