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> And I wouldn't bet on that since Microsoft surely sent a big team of their brightest cookies to make a valuation of the company.

The same people who valued Nokia ($7.6 billion writedown) and aQuantive ($6 billion writedown)?

Different people. Both of those acquisitions were in the Ballmer era.

Don't Microsoft own a fund? Wouldn't they realistically send the same team to value Linkdin and Nokia?

Would you send the same people after the job they did last time?

This criticism is only valid if you can show that the due diligence team that worked Nokia also a) misreported the red flags / the enterprise value of the acquisition, and b) were responsible for mismanaging the post-merger integration.

A good deal of M&A goes ahead despite the warnings from the DD team. Sometimes it's a matter of CEO ego, sometimes a strategic long shot overruling the red flags.

It's easy (and fun!) to criticize in hindsight, but there was a strong strategic case to be made for the Nokia acquisition back then. Obviously it didn't work out, but given Microsoft's cash reserves at the time it wasn't even a particularly large gamble.

It's not "criticism in hindsight." It's simply acknowledging that those same "bright cookies" can make mistakes.

Fair enough. My point was that there's a difference between a valuation mistake and a calculated risk that doesn't work out - and it can be very difficult to tell which one's which, especially from the outside. Any acquisition can end up a failure because of integration issues, changing market conditions, failure to execute new products, etc. - it doesn't necessarily mean the original valuation was wrong.

Very good points. Thanks.

I really did not see many people making a case for Microsoft's Nokia acquisition (here and in the business press).

It seemed mostly negative.

Well, both HN and the business press are often negative - and on the surface Microsoft was buying a failing business, so it's a reasonable reaction.

A case in favor of the acquisition might go something like this:

1. Microsoft was far, far behind in mobile, with little hope to catch up through internal efforts alone. "Winning" mobile had the promise to unlock a lot of new revenue across Microsoft's other business units, "losing" mobile threatened to restrict Microsoft to the stagnating desktop market.

2. The industry was already consolidating (Google buying Motorola), there was a looming patent war, Nokia was sitting on a ton of patents, and was one of the few (if not the only) good target left for acquisition.

3. CEO of Nokia was ex-Microsoft, so Microsoft likely had a good idea what they were getting. (Conversely, this could mean Nokia CEO knew exactly how to apply lipstick to a pig to get it sold).

In short, limited time window to act, potential for dramatic growth for Microsoft if it works out, relatively small downside if it doesn't (IIRC the cost was something like 10% of Microsoft's cash reserves at the time). I'd take that bet to be honest.

All of this is speculation of course (I have no inside knowledge), and it was clearly not worth it in the end, but I can understand why a decision like this might have been made.

Nokia was a public company. Sure they paid a premium, but the valuation was defined by the share price.

The problem with Nokia was with the disaster of Microsoft's mobile strategy.

Exactly. I had LinkedIn on my list of undervalued tech stocks, and I think this bears that out. LinkedIn has absolutely no competition. LinkedIn is the world's biggest, virtually-complete graph of most enterprise organizational charts / structures. That alone will be valuable for Microsoft's enterprise business.

MS could, erm, look up those org charts on linkedin.com for $0 (indeed very useful at times.) What value is added by buying LinkedIn for $26G? How owning LinkedIn is going to add $1-1.5B/year (assuming eventually you want a P/E between, I dunno, 15 and 25), to MS's revenue?

(I'm sure someone at MS has an answer to this, it's just that they haven't been tremendously successful in the past with their big acquisitions; I don't think Skype or Nokia paid off. And in general tech companies often buy other companies without much apparent success. Why is it so crazy to doubt their wisdom in any particular instance?)

> MS could look up those org charts

That's the best remark in the whole thread. Employee poking at competitors. Sales teams looking up the right people to connect with. Thanks to the LinkedIn share button, like Facebook, they can have parts of your browsing history. I don't even know whether the purchase should be allowed.

Wow.

In terms of data mining this is still a huge price-point, but obviously some team at MS projected the benefits vs expense.

Yeah, once integrated, I'd be worried if I was an MS employee using it to scout competitors and talk to recruiters.

This also gives MS some great data to possibly feed into the team that manages their investment portfolio. How valuable would it be to have a (admittedly not perfect) feed of employee growth/deflation for various companies? That would also provide a ton of leverage for future acquisitions, etc.

There's a LOT you can learn from LinkedIn data if you have access to the unfiltered data.

Exactly! And the gold weapon would be able to see all employees' corporate and private emails, along with their search queries. Uh oh.

Reminds me of the joke - MS Executive buys Skype for $8bn - didn't anyone tell him you can download it for free?

> What value is added by buying LinkedIn for $26G?

1. Integrate Skype into LinkedIn 2. Add a shared chat screen (video group chat)

This will allow many Human Resources to perform interviews more efficiently (in return to subscription). I can imagine many other new attractive features MS could easily add (e.g. syntax highlighting in group chat).

And can get rid of horrible Webex calls.

Webex at least works under linux (unfortunatelly only 32bit firefox).

I maintain a windows vm solely for running webex! I did not know this worked - thanks.

Jit.si

Works in browser, no account, encrypted by default.

New web based WebEx attendance is essentially in beta.

They haven't managed to integrate Skype into anything else, it's a complete shemozzle. Why would they suddenly manage to integrate it into LinkedIn?

Skype is offered in Office365 packages and appears to have replaced Lync

It seems to be one of those deals where the deal-makers (i.e. the finance professionals and lawyers involved in the deal) are doing it for the fees they stand to earn from it. A bunch of nameless faceless people who will never be held responsible for the deal.

MS bought skype just to stop google from buying they. Google made a big for skype and MS swooped in and outbid them. They never had any real plans for skype they just dont want to allow google to gain near monopoly in the consumer VOIP market. Which seems strange for MS to care about since they were not in this sector previously but Ballmer just held such a huge grudge with google and did it out of spite. Really shows what kind of CEO Ballmer was and why MS is so much better off without him

Skype for Business (and it's predecessor Lync) owns corporate voice and collaboration market

Unfortunately.

But it didn't back then, and it's only called Skype because MS acquired Skype, not the other way around. At the time of the acquisition, comparing Skype to Office Communicator (as it was called before Lync) was a stretch at best.

Cisco WebEx and Jabber own corporate voice communication (mostly because everyone uses Cisco VoIP phones). Skype is used mostly in the SMB market.

Skype for Business is just rebranded Lync. AFAIK there aren't any new features that were integrated across from Skype. Hell, it's still lync.exe.

We just 'upgraded' from Lync to Skype for Business and as far as I can tell it's exactly the same program with slightly different UI chrome.

They, erm, can't do that. Scraping LinkedIn would violate the terms of service.

It's actually a brilliant synergy. LinkedIn was limited to a revenue model around HR, recruiters, and individuals buying subscriptions to different views of their core service. They weren't in the business of building CRMs, enterprise email solutions, or operating systems. And yet those very systems are the ones where people most natively would want to ask "what is the context and history of the person I'm connecting to?"

Beyond the expansion in potential revenue models, it's rational for Microsoft to spend their cash on things that cement their dominance in the workplace, particularly as Apple and Google could always choose to make a hard push into that space. Assuming LinkedIn continues to dominate as a professional network, Windows 15 Powered By LinkedIn is a hell of a moat to cross.

Well said. There are lots of reasons for skilled software engineers to despise LinkedIn. They don't need its version of networking, and they find recruiters' endless serenades tiresome.

But in most other lines of work, the recruiters don't knock so often (or so cluelessly) ... and the access to other people's profiles actually is quite handy. Sales. Finance. Media. Education. Law. Non-profits. It's a long list.

It's anyone's guess whether Microsoft can execute the bulk of its strategic plan for LinkedIn. But the plan is not foolish.

> They don't need its version of networking

I don't really get this - it's weird to me that when I meet other developers at meetups or conferences or wherever, it doesn't seem "cool" to connect on LinkedIn, but nothing else fills that same role. I'm happy to trade GitHub profiles, but unless both of us do most of our interesting work in the open, which statistically we don't, then that's a much less informative profile.

> it is a corporate social network

I'd go further and say it is a global corporate social network (unlike, say Yammer, which is a local corporate social network).

I agree that this is a fantastic play by MS. When I am researching both job candidates and employers, LinkedIn is one of the two resources I use (Google being the other).

does anyone actually interact on LinkedIn? I thought it was just a platform for recruitment spam

Recruitment spam or not it works and mediates a lot of jobs and connections. I don't think you should diminish LinkedIn's role on the job market.

And yes, a lot of my colleagues are very frequent users of LinkedIn for sharing and discussing business related stuff. With that said these tend to be non-techy people. Techy people tend to use sites like HN instead.

In my experience, there's plenty of sales people and middle managers posting stuff and commenting. Usually platitudes and mangled quotes from rich people, plus submissions of their company's marketing blogs.

Those things are just the neurotransmitters spewed by people who are becoming analogues to neurons. (Not aware of why they are filtering and passing on signals, but somehow performing some kind of decision making in aggregate.)

Absolutely. Various technical forums are active despite the horrible, horrible UX.

Couldn't have been said better - I mean, even a small, less than half-way competent team could easily build something providing a (much) better UX as compared to the LinkedIn forums.

I get most of my gigs through contacts on linked-in.

Yes, I got a guy in trouble for selling me a password-protected system board and not replying when I asked him whats going on (he took it from his boss' laptop, wrote it off as defective or something). Heh

Imagine this: A recruiter messages you and then follows up with a skype interview through LinkedIn.

So you can tell them in person that you don't live in the same country or work in even vaguely the same area rather than ignoring them as you do now?

As opposed to using the superior Hangouts product? That's gonna suck.

To make that happen they'll have to put up even more barriers to messaging people out-of-band. Much like Upwork/etc.

You can do this... today! Without spending $26bn.

If MS can disconnect LinkedIn from having to monetise its social graph directly, they might actually be able to turn it into something likeable.

"Corporate social network" is nowhere near an oxymoron. The value of strong and weak connections alike is critical to businesses and professionals.

Considering the Yammer failure, This purchase makes no sense whatsoever. Satya is flushing MS down the toilet.

LinkedIn is very big in enterprise sales, for example - gathering intel on the org.

Here is the main problem: Who likes LinkedIn?

Sure, we can debate its usefulness, how popular it is outside of IT, etc. But I think across the board, no one LIKES LinkedIn.

You dont need to be liked to be popular. How many people like facebook ?

Thats my point though. You dont have to be liked to be popular, but it becomes a lot easier for someone else to become popular if you are not liked.

And I do think the general sentiment towards Facebook is much more positive than LinkedIn.

Facebook is irritating and intrusive. LinkedIn is spam. It's garbage used because legacy and lack of alternative.

It seems like recruiters do.

Obviously most engineers don't.

i like it ok. it directly led to my current job, and couple other good offers. for $0 i can't complain.

> And I wouldn't bet on that since Microsoft surely sent a big team of their brightest cookies to make a valuation of the company.

By that simplistic reasoning no big company would ever make a mistake.

As far as it is a "corporate social network" the interests of all LinkedIn users, both the good and the bad ones, do not benefit from forcing integration of Microsoft software, accounts, paid services etc. down their throat.

I am not sure what their goals are with this but they are definitely showing that they don't want to be in the technology business anymore.

Nnnnnnnnnn-maybe.

Seems more like a partial swing towards enterprise-emphasis.

> The only real complaint about this purchase would be that LinkedIn was overvalued. And I wouldn't bet on that since Microsoft surely sent a big team of their brightest cookies to make a valuation of the company.

That kind of justification has almost always gone wrong.

Its a great acquisition. But is the price justified?

Valuations are a funny thing. There's sooo much cash floating around in large companies coffers doing nothing (especially Microsoft's) that the numbers start meaning a whole lot of nothing after awhile.

>And I wouldn't bet on that since Microsoft surely sent a big team of their brightest cookies to make a valuation of the company.

Yeah, I'm sure they did the same with Yammer too.