LinkedIn 'can fuel Office 365, but Microsoft faces integration challenges'

Analysts welcome LinkedIn purchase, but sound warning over Microsoft's history of acquisitions

Microsoft's $26.3 billion acquisition of LinkedIn could provide the next direction for Office 365 and AI, but the tech giant will have difficulties integrating the social network into its various divisions, analysts believe.

Those praising the move have focused on the potential for Microsoft to outflank newer rivals and broaden its often-uttered plan to be "cloud-first, mobile-first".

Martin Garner, senior vice president for internet at research house CCS Insight, said: "This move gives Microsoft access to the world's biggest professional social network at present ... [and] also brings the opportunity for deep integration with a large number of Microsoft assets.

"There are many opportunities for integrating Microsoft services with LinkedIn including Office 365, Exchange, Outlook, Skype, CRM (Dynamics) to challenge more successfully. It is also a fantastic resource for Microsoft's artificial intelligence efforts, providing a huge amount of data mining opportunities."

But he added: "However, it will be a substantial integration challenge to do this quickly and extract maximum value from it."

Ewan Parry, a partner at OC&C Strategy Consultants, sounded a similar note, saying it would help Microsoft "build direct links to business end-users".

"It has already made significant progress by taking Skype into the B2B arena with Skype for Business, and we can expect the company to now embed Skype into the LinkedIn platform to offer full multi-channel social media for business - voice, video and messaging," he added.

"Strategically, the deal makes good sense for Microsoft and could lay the foundations for something more transformational in the market for B2B collaboration and sales."

Richard Windsor, an analyst at Edison Investment Research, questioned the $26.3 billion price tag, but said it could be worth it if the integration of LinkedIn into Microsoft is done well.

"The key to this acquisition will be using LinkedIn's network, data and its assets to make Office, Dynamics and Cortana more compelling for its subscribers. If LinkedIn and Microsoft can improve the productivity and ease of use of LinkedIn then that could really help with converting millions of free users of Office 365 to becoming subscribers as well as making Dynamics much more sticky," said Windsor.

He did add a note of caution, however, criticising Microsoft's track record on acquisitions, after the company wrote down its 2014 acquisition of Nokia for more than it bought it for last year, before slashing more jobs related to it last month.

"Microsoft does not have a good history at making the most of its acquisitions and making the most of LinkedIn represents a real challenge," Windsor stated. "This is because LinkedIn will continue to operate independently of Microsoft and so how closely the companies will work together is a real question.

"Hence, while we do not have a problem with the high price paid or with the rationale of the transaction, it has to be flawlessly executed for Microsoft to see a good return on this substantial investment."

Windsor is not alone in being hesitant about the acquisition.

Richard Holway, chairman of TechMarketView, said: "Of all the social networks, LinkedIn is the most 'business' oriented. So this fits with Microsoft's 'corporate' core. But I'm not quite so sure about the hefty price paid. Remember LinkedIn had revenues of 'just' $861 million in Q1 and reported a loss of $46 million - so $26 billion is a pretty hot price."

He added that it was "no wonder Microsoft shares fell five per cent on the news of this its largest ever acquisition. On top of that Microsoft doesn't have the best of records with its M&A. Remember Nokia? Even Skype has hardly been the greatest of success stories."

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