The decision of Microsoft >to spend over $26 billion to buy LinkedIn , the “world’s largest professional network”, is an earnest attempt by the company founded by Bill Gates for continued relevance in a space that it once dominated, to the point of being a monopoly. That space — the technology sector — is nothing like what it was in the 1980s and 1990s, when Microsoft ruled. Over the last decade and a half, the rise of the Internet, social media, and smartphones have dramatically altered the contours of this space, giving rise to new and more powerful companies such as Google, Facebook, and Amazon. Add to this mix, Apple, a company almost as old as Microsoft but one that could afford to look beyond its legacy products and create new ones, even new categories. For a long time, Microsoft wasn’t able to reconcile itself to such changes, tied as it was to the old way of doing things. As recently as last year, a sizeable share of its $93.5 billion revenue came from its old business model of selling its operating system and Office suite to desktop buyers across the world. When Microsoft did wake up, the game had already slipped from its hands. Rather than create the future, as the cliché in the technology world goes, Microsoft had to reconcile itself to playing me-too in this new world.
This is not the first time Microsoft is trying the acquisition route to make up for lost years. Three years ago, it bought the phone-maker Nokia for nearly $8 billion, a move that its then CEO Steve Ballmer called a “bold step into the future”. But Microsoft got nowhere with that buy and had to write down the investment eventually. Notwithstanding this, critics are more optimistic about its latest acquisition, Microsoft’s biggest ever. Satya Nadella, who took over as CEO in 2014, has been laying emphasis on playing to the company’s strengths. He has since focussed on new businesses such as cloud services, one of the fast-growth areas for the company. But what does a software-seller have to do with a social network? Microsoft has a history of providing tools to businesses. And LinkedIn, though certainly not the most high-profile social network around, is in the business of linking business professionals in the new age. With more than 400 million members, LinkedIn makes its money through recruitment ads and subscriptions. As its CEO, Jeff Weiner, noted in a post: “Essentially, we’re both trying to do the same thing but coming at it from two different places: For LinkedIn, it’s the professional network, and for Microsoft, the professional cloud.” The coming together is sure to give Microsoft the traction it needs to thrive in a digital age, as it moves away from its legacy.
