Microsoft has always been a huge, profitable company but it had become less and less relevant over the last 15 years. Satya has been on a quest to make Microsoft relevant again with a string of acquisitions in mobile and cloud, and this acquisition doubles down on that strategy.
Two Kinds of M&A
There are two kinds of M&A. One that is driven by greed of EPS and the other that is driven by greed of topline.
The Microsoft acquisition of LinkedIn is going to be the defining deal for Satya Nadella’s tenure, and he’s buying it for relevance.
Own the Professional Graph
Microsoft is buying LinkedIn to own your professional graph.
Microsoft already knows a lot about your work — your email, your calendar, your Skype calls & conferences, your Sharepoint intranet — are all great sources of data about who you work with, when and how.
By combining, its assets and enriching them with LinkedIn graph data and identity, it can make your experiences in its apps better. Of course, Microsoft will continue to make LinkedIn better but make no mistake:
This M&A is about making Microsoft cloud & apps better with LinkedIn data.
Growth Requires Investment after M&A
Linkedin was constrained as a public company in how much it could invest in its growth as Wall Street is increasingly looking at EPS which is hard for a company with so much potential for growth.
There has rarely been a company with more potential for growth and as much total addressable market as LinkedIn.
By finding a strategically aligned buyer, Jeff Weiner and Reid Hoffman are giving LinkedIn an opportunity to live up to its potential.
Its a sad reflection of our times that public companies are opting to be acquired in order to pursue growth. Marc Andreessen has been complaining about our public markets for a long time and this is an epic example of public markets undervaluing a stock and thinking short term.
Satya Nadella has time and again shown a grasp on the market reality that was far out of reach for Steve Ballmer. By acquiring LinkedIn, he gets a new source of data for the machine learning & AI, new network for Skype, opportunities to go after CRM, HR and productivity apps markets with a unique asset.
Microsoft is relevant again
Today, is Apple’s big event. On a day like this, for over a decade, we in silicon valley and the tech media have largely ignored Microsoft.
None of the giants born in last 15 or so years from Salesforce to Workday in enterprise, and Facebook to Snapchat in consumer had a Microsoft footprint in any meaningful way.
Now, we can’t ignore Microsoft anymore. If you are an entrepreneur walking into a VC office, we will once again ask you: What is your Microsoft strategy?
Welcome, Microsoft. Good to have you here in the Silicon Valley again.
(Cross-posted @ Storm Ventures)