Microsoft buys LinkedIn for 26.2B – Why?

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Am I the only one scratching my head on this one? It took me by surprise when I first heard it and I’ve been thinking about the strategic play that must be going on.

What would a technology company want with a company that serves a world-wide network of business professionals? A network of business professionals from the Fortune 1000, Inc 5000, etc with plenty of professionals from Google, Apple, Linux-based software providers, IBM, HP, Oracle, etc. I’m sure there are just as many people who are happy about the acquisition as there are people who are asking themselves when a new technology brand agnostic business social platform will appear so they can jump ship.

I found a couple of interesting items.

Datacenter capability to augment Azure

Did you know that LinkedIn runs several private data centers in California, Texas, Virginia, Singapore as well as a recently opened center in Portland, Oregon? They are using a hyperscale datacenter infrastructure similar to Google, Facebook and (wait for it) Microsoft. They design their own custom hardware, software and data center infrastructure which do not rely on standard offerings from Dell, HP, Cisco or other large IT vendors.

It would certainly help the capacity of Microsoft Azure similar to what Amazon does with AWS. And the datacenters and hardware/software technologies are owned by LinkedIn (now Microsoft).

Big Data and Machine Learning technologies

LinkedIn has also been busy writing very advanced software to support it’s efforts in the professional network. Just last week, they released the Photon machine learning platform that runs on top of Apache Spark. This points to a large skill set on the staff of LinkedIn in machine learning, Apache Spark, Apache Yarn, Hadoop MapReduce etc. These technologies and libraries could very well benefit other initiatives within Microsoft that have nothing to do with the LinkedIn professional network.

Some pundits describe a new Microsoft enterprise software development business. Perhaps.

I think this was a good move for Microsoft as LinkedIn is cash-flow positive, so it effectively pays for itself. Integration of capabilities should theoretically reduce R&D and SG&A expenses, which have been climbing substantially for LinkedIn over the past few years.

If Microsoft leaves the retail business of LinkedIn alone, I think this will work out well. However, if they use their power to strong-arm users into Microsoft technologies, I think it will open a big opportunity for an alternative to LinkedIn in the market.

© Mark Travis – All Rights Reserved      http://www.travis-company.com

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