The Real Reason Microsoft Is Buying LinkedIn (And It Is Not For Their Profitability)

Great post by Leon Tribe on why Microsoft bought LinkedIn – the real reason, his view anyway!

That CRM Blog

Microsoft bought LinkedIn this week which came as a surprise to practically everyone. No one leaked the story and the rumor mill was quiet as the grave. The immediate question was “Why?”

The Numbers

Financially, like my old friend Salesforce, recent years have not been kind to LinkedIn in terms of profitability. Revenue is expected to be $3.7b for 2016 and is growing but they consistently make a loss.

So, from a financial perspective, the deal is problematic. At $26.2b, even if Microsoft took 100% of the revenue as profit, it would take more than seven years to get their money back. If we are a bit more realistic and suggest a modest profit of 10% on this revenue base, we are looking at a return of the buy price in 70 years.

And yet, Microsoft paid almost a 50% premium on the share price. It is clear they were…

View original post 1,104 more words

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