On Monday June 13th, Microsoft said that it would acquire LinkedIn in a $26.2 billion cash deal. The acquisition, by far the largest in Microsoft’s history, unites two companies in different businesses: one a huge developer of software tools, the other the largest business-oriented social networking site, with 433 million members globally.
Back in February 2016, LinkedIn’s stock price fell more than 40 percent after it forecast weaker-than-expected growth for the year. The share price had been close to $225 at the beginning of 2016; a month later it fell to almost $100.
This rapid devaluation has was a problem for more than just investors. LinkedIn’s employees are paid largely in stock, and therein lies the problem. Inside Linkedin’s new 26-story skyscraper in downtown San Francisco, as well as the corporate HQ in Mountain View, Calif., there have been persistent rumors about whether LinkedIn could retain its top talent as the marketplace diluted their income.
Among Silicon Valley companies, “LinkedIn is among the most aggressive in using share-based compensation — there is no question about that,” Mark Mahaney, a veteran technology analyst at RBC Capital Markets, said in an interview on Monday. “If the stock had stayed down, it would have seen employee churn.”
Microsoft, which includes stock-based compensation in its non-GAAP earnings calculation, made a point on Monday of saying that the combined company would follow Microsoft’s practice. In other words, from now on, LinkedIn employees will no longer enjoy results that looked rosier because their stock-based compensation was not included.
The deal is Microsoft’s biggest gamble yet that the traditional software business is shifting quickly to cloud computing, a model in which customers rent software and other services delivered via the internet. While LinkedIn does not have the household name of Facebook, a much larger and more lucrative social network, it is the most widely used site for people to advertise and promote their professional skills and career achievements.
First published by Adrian G Stewart at OOKII.Company