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Why Microsoft bought Linkedin, and why we own it

Alex Pollak

Loftus Peak

This LinkedIn move, in our view, is a clear response to companies like Google, which has used its search business to build a cut-down version of almost everything that Microsoft does and much much more, which must be making Micosoft very nervous. Meanwhile, Slack and Atlassian are pushing out the boundaries in workplace productivity – and neither Google nor Microsoft are there.

For the record, Microsoft’s track record in acquisitions isn’t great. It bought Nokia for US$8b, and wrote off virtually all of it within two years. It also bought Skype for US$1.6b, but data telephony is now a ubiquitous product (Google Hangouts, Whats App, Viber, FaceTime).

From Microsoft’s perspective, it is not a killing amount of money (its capitalisation at US$393b is 15x that of LinkedIn) having regard for how much it could be worth if they get it right. We own Microsoft because of its indispensable workplace tools now, but for the disruption that will come as a result of virtual reality, in which it is making great strides. Social networking in the workplace is disruptive, and so could work, but it doesn’t look like a must have. As always, happy to be proved wrong.      

 

 


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CIO of Loftus Peak, a specialist global fund manager with a track record of successful investment in some of the world's fastest-growing listed businesses.

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