LinkedIn to benefit from the deal
In the earlier parts of the series, we discussed that LinkedIn’s (LNKD) business has been showing signs of a slowdown. The company’s major business division, Talent Solutions, faces macro headwinds in the EMEA and APAC regions while its advertising revenues could possibly take a hit in the wake of increased competition from Google (GOOG) and Facebook (FB). The company’s user base has grown slowly but steadily in the past. However, what’s more of a concern is its stagnating unique visiting members as can be seen in the chart below.
The current deal with Microsoft (MSFT) is a complete win-win for both companies. With Microsoft by its side, LinkedIn will gain access to a wider business community instead of just scaling its operations to better position itself among the big names in the Internet industry.
Microsoft’s acquisition announcement is likely to fuel an M&A (merger and acquisition) frenzy in the Internet space with eyes turning to Twitter (TWTR) as the next possible acquisition target. Twitter’s buyout rumors have been around for quite some time considering the company’s lackluster stock performance, the exodus of key executives, and the stalled user base. This scenario somewhat resembles LinkedIn’s state. Both the companies are battling hard to turn their fortunes around.
MSFT-LNKD deal suggests Twitter could be the next target
Recently, in the tech space, Symantec (SYMC) announced the acquisition of Blue Coat Systems for $4.7 billion. In June 2016, Salesforce.com (CRM) and IBM (IBM) also announced acquisitions. IBM announced the acquisition of EZSource, an Israel-based (ISL) (EIS) company focused on application discovery. Salesforce.com announced the acquisition of Demandware for $2.8 billion. Demandware provides software to design e-commerce websites.
For diversified exposure to select software companies in the United States, you could consider investing in the SPDR S&P 500 ETF (SPY). This ETF has 8% exposure to the application software industry.