The deal gives Microsoft, whose Office and Windows software are default portals for information workers, the leading online resume repository and workplace relationship database.
Microsoft’s $26 billion deal to purchase LinkedIn is the boldest risk the company has taken under Chief Executive Satya Nadella.
The deal, sealed on Thursday, also poses a question: Can Microsoft, formerly hostile to Silicon Valley, scoop up a Bay Area stalwart without breaking it?
LinkedIn gives Microsoft, whose Office and Windows software are default portals for information workers, the leading online resume repository and workplace relationship database for that same crowd.
Microsoft hopes to use the professional social network to improve its software for salespeople and build new applications that combine LinkedIn’s data about relationships with Office’s information about organizations and how people spend their time at work.
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But Microsoft has a checkered history when it comes to following through on its plans following megadeals. The purchases of Nokia’s phone unit and digital advertising company aQuantive both resulted in billions of dollars in writedowns.
“The good news is this is Nadella’s first big one,” said Brent Thill, software analyst with UBS. “The bad news is, the big ones haven’t gone so well.”
Microsoft’s position today contrasts with the last time it courted a large Silicon Valley Internet company.
Microsoft spent five years trying to buy web pioneer Yahoo, a flirtation that ultimately ended in 2009 with an agreement that Yahoo would use Microsoft’s search technology.
At the time, Microsoft had a tarnished reputation in corners of the technology industry, born of the company’s reputation as a fierce competitor hostile to technologies built outside of its orbit.
The gulf between Microsoft and the rest of the industry was so wide that some executives on both sides of the table in the Yahoo talks were concerned that the Internet giant’s rank-and-file employees would revolt at the prospect of rule from Redmond, according to people involved in the discussions.
There was “a lot of discontent,” said Al Hilwa, who worked on developer tools at Microsoft, and later joined researcher IDC. “People in the Bay Area were not happy about it. There was a huge amount of hand wringing about whether Microsoft’s culture was appropriate for the folks at Yahoo.”
The Microsoft of 2016 isn’t that toxic, analysts and technologists say.
In his nearly three years at the helm, Nadella has pushed the company’s culture to embrace open-source software and other areas dear to Silicon Valley’s heart. A gentler tone, along with a rising stock price and progress in the company’s growing web-based software, has boosted morale at Microsoft.
“It’s being viewed as a destination versus maybe a few years ago, when it was a place that people wanted to move on from,” Thill said. “Nadella’s created more of a magnet for talent.”
Thill, after crunching data from online job forum Glassdoor, noted that Microsoft’s employee sentiment had climbed under Nadella, and recently stood 10 percent above its peers, surpassing Apple for the first time on an annual basis.
Still, some LinkedIn employees apparently had the opposite view of the deal. The Glassdoor data indicates a drop in employees’ approval of LinkedIn Chief Executive Jeff Weiner after the deal was announced.
“There’s always going to be disgruntled people when a large company buys an independent startup,” Hilwa said. “Microsoft has to make a strong appeal to people to stay. They have to articulate what they’re going to do in the next 12 months.”
Nadella outlined some of those plans in a blog post on Thursday, detailing plans to add elements of LinkedIn’s tools to Outlook and Word.
The top priority, Nadella said, “is to accelerate LinkedIn’s growth.”
The company has about 470 million members. It posted a profit of $8.6 million during the three months ended in September, the company’s first profitable quarter in nearly two years. Revenue has been surging. LinkedIn’s sales of $959 million during the quarter were up 23 percent from a year earlier.
In an effort to keep LinkedIn’s culture and team intact, Microsoft has limited the integration of the two companies. Nadella said on a call with analysts after the deal was announced in June that the company had learned lessons from past acquisitions, and would keep LinkedIn’s Weiner in charge of a relatively independent entity. Weiner also heads the integration team responsible for linking the two companies.
That’s a contrast to Microsoft’s approach with Nokia, in which teams at the Finnish company, from finance to marketing to engineering, were grafted onto their Microsoft counterparts, an approach that ended with a severe financial hit and layoffs.
Layoffs at LinkedIn units are likely in any case as the company loses the administrative requirements of a publicly traded company.
Microsoft Chief Financial Officer Amy Hood told financial analysts this summer to expect $150 million in annual savings from “cost synergies,” corporate jargon for streamlining of redundant processes, which often includes reduced headcount.
LinkedIn at the end of September had 10,113 employees, primarily at its Mountain View, Calif., headquarters. Microsoft has 113,616 employees.
“I am energized and optimistic for what we can achieve together and the journey ahead,” Nadella said.