Microsoft ’s Monday announcement that it’s buying LinkedIn for $26.2 billion raises important questions about the value of technology companies and stocks. The deal also carries policy lessons.
The software giant is paying $196 a share for the social-media firm, a 50% premium over Friday’s closing price. Microsoft CEO Satya Nadella is shelling out roughly seven times LinkedIn’s annual revenues for a business that isn’t profitable and has seen slowing growth despite its 433 million users. LinkedIn allows these users to share rolodexes, seek job opportunities and learn about industry issues. Most of LinkedIn’s revenue comes from businesses seeking to identify potential hires.
In a note to employees, Mr. Nadella touted “new experiences such as a LinkedIn newsfeed that serves up articles based on the project you are working on and [Microsoft] Office suggesting an expert to connect with via LinkedIn to help with a task you’re trying to complete.” LinkedIn could also provide users of Microsoft’s sales software with info on potential customers.
Source: http://www.wsj.com/articles/linkedin-and-the-tech-valuation-boom-1465858665