Microsoft which is one of the leading companies in technology is extending its investments by purchasing the network company LinkedIn which is well known professional networking services, for over $26 billion.
Microsoft made this known on Monday during a press release stating that $196 will be paid for each share that exists in LinkedIn which has approximately 430 million members.
“The LinkedIn team has done a great job in bringing together business professionals from all over the world. As a team, the investments of both companies will be further heightened.” This was said by the chief executive of Microsoft Satya Nadella.
Taking a look at previous years, this is the largest investment Microsoft has made from the time Nadella became CEO IN 2014.
Although Microsoft will be purchasing LinkedIn, there will no changes in the way business was carried out. LinkedIn will only be functioning under the general body of Microsoft while the chief executive of LinkedIn Jeff Wiener will still retain his position.
The main aim of Microsoft is to have access to over 400million LinkedIn customers and improve on the services they receive. Additional services will be provided to the customers and changes will not be made to the existing services.
A professor of the Warwick Business School stated that “the investment is a good idea backed by Microsoft’s enterprise in its cloud platform and portfolio of brilliant business services.”
This will showcase what Microsoft is capable of doing and the various services they provide.
However on Monday, Microsoft faced a drop in their stock which raised questions about whether they are taking the right steps in making such a huge investment. Apart from the fact that much profits will not be made from this investment, it is also unclear if both companies will be able to function as one body. Considering the fact that both companies have different strategies and capabilities.
It can be noted that Microsofts purchase of Nokia and Yammer did not yield the spectacular profits expected.
However, Microsoft is purchasing a company that is already strong in the social networking world which leaves them to only continue where LinkedIn stopped.
In an interview with CBC’s The Exchange, Ryder stated that “this is the way the world is going. The social media is taking over all business ventures hence if you are not part of it, you cannot compete with other investors. This initiative prepares them for the future.”