Here's what Wall Street thinks of Microsoft buying LinkedIn

Advertisement

Mark May and Walter Pritchard, Citi

Mark May and Walter Pritchard, Citi

May and Pritchard believe that the deal is a win for Microsoft. "From an Microsoft perspective, we believe the strategic rationale makes sense," said the Citi analysts.

"LinkedIn has, for some time, been the 'Outlook address book' for most business professionals. There are likely new ways Microsoft can integrate/extend this franchise by owning it."

For LinkedIn, it appears that the sale price of the move is an admission that the company was facing strategic challenges.

"Not to take away from a nice exit for most LinkedIn investors, but the sale may also reflect an admission of the company’s recent issues," said the note. "LinkedIn management's guidance for [calendar year 2016] suggests that revenue growth will slow to ~20% in the second half of the year – down from ~45% just two years previously."

Advertisement

Brent Thill, UBS

Brent Thill, UBS

Thill is of the opinion that the deal fits in nicely with Microsoft's strategic direction.

"In our view, the deal makes strategic sense as it helps build out Microsoft's application layer, which has been looking for growth, and also ties nicely to Microsoft tools such as Delve (org analytics, data visualization), Office 365 Groups, and Power BI," he said in a note.

On the con side, Thill does mention that Microsoft has never done well with large merger deals (see: Nokia) and there could be a culture clash between the younger LinkedIn thinking and the mature Microsoft way of doing things.

Advertisement

Victor Anthony, Axiom Capital Management

Victor Anthony, Axiom Capital Management

Anthony loves LinkedIn saying the company has "one of the best business models on the Internet" and is bullish on the deal for three reasons:

  1. LinkedIn's Talent Solutions business in strong and is "only 20% penetrated into large enterprises."
  2. Both the Marketing Solutions and Premium Solutions have a "strong growth opportunity."
  3. LinkedIn's presence in China is growing and it is "one of the few Internet companies we believe has a better chance of succeeding in that market."

The analyst also said tht he expects Microsoft's size and cash to help LinkedIn's business to grow by leaps and bounds.

Additionally, Anthony said this means every tech company outside of Alphabet, Amazon, Facebook, and Alibaba is a possible acquisition target.

Randle Reese, Avondale Partners

Randle Reese, Avondale Partners

Reese does not think that the customers of LinkedIn are going to be happy with the deal, despite the benefits Microsoft could bring.

"We also expect the universe of recruiters, the key customer base of LinkedIn, to react negatively to this deal," the analyst wrote in a note.

"On the other hand, LinkedIn might benefit from the greater size and sophistication of the Microsoft enterprise sales force."

Advertisement

Brian Pitz, Jefferies

Brian Pitz, Jefferies

Pitz said that the deal is a key step in Microsoft's large-scale shift.

"The acquisition, which is expected to close later this year, further enhances Microsoft’s transition from a desktop software firm to a cloud computing services provider," the analyst said in a note.

Additionally, Pitz believes that the deal underscores a new trend in technology mergers and acquisitions.

"LinkedIn’s unique position and reach highlights the value of a differentiated asset in the Internet landscape," wrote Pitz.

"We believe that M&A will continue to be a theme in the Internet with a focus on uniquely positioned platforms, 100% owned IP, and differentiated technology in fragmented industries."