Microsoft buys LinkedIn for $26.2b

Microsoft Corp will buy LinkedIn Corp for $26.2 billion in its biggest-ever deal, marking CEO Satya Nadella's first big effort to breathe new life into the software giant's business-productivity tools.

By connecting core software like Microsoft Word and PowerPoint with LinkedIn's network of 433 million professionals, the deal marks a turn for Microsoft, which stumbled in a mobile-phone venture launched under Nadella's predecessor. It also aims to take on challengers in several areas.

The deal could help keep services like Outlook e-mail relevant enough that customers won't want to leave it for rivals such as Google's Gmail, analysts said. And because the acquisition brings a network heavy in marketing and sales professionals, it delivers a shot across the bow to competitors in those areas, such as Salesforce and Marketo.

For LinkedIn, the opportunity to tap Microsoft's customers, including the 1.2 billion users of its Office suite of business software, could help it jumpstart growth, which has slowed in recent quarters.

"LinkedIn and Microsoft really share a mission" of helping people work more efficiently, Nadella said in a conference call with analysts. "There is no better way to realize that mission than to connect the world's professionals."

Nadella has been trying to reinvigorate the once-lumbering company since taking over two years ago and has helped build more credibility around Microsoft's efforts in areas such as cloud-based services.

When he took the top job in February 2014, the company's share price was $34.20; early Monday afternoon, it was trading around $50.

"The Venn diagram is pretty big," Nadella said in a separate call with Reuters, meaning the overlap of customers of both companies, although he didn't give a precise number.

In a presentation to analysts, Microsoft said after adding in LinkedIn, the total potential market size of Microsoft's productivity and business-process segment was $315 billion, up from $200 billion without LinkedIn.

Nadella gave an example of a customer walking into a meeting scheduled on a Microsoft Outlook calendar integrated with LinkedIn, receiving notification that one of the people in the meeting went to college with a colleague.

The offer of $196 per share represents a premium of 49.5 percent to LinkedIn's Friday closing price.

LinkedIn's shares soared 47 percent to $192.42 and Microsoft's shares were down 2.7 percent to $50.06.

Monday's deal raised investors' hopes that another social media company, Twitter, could be the next acquisition target, sending shares up more than 5 percent.

Reid Hoffman, chairman of LinkedIn and the company's controlling shareholder, said the deal has his full support.