How Useful Is LinkedIn to Microsoft?


Aug. 11 2017, Updated 10:39 a.m. ET

Mixed experience with acquisitions

It cost Microsoft (MSFT) about $26.2 billion to bring LinkedIn, an advertising rival of Facebook (FB) and Twitter (TWTR), under its control. The acquisition of LinkedIn followed Microsoft’s ill-fated purchase of Nokia’s (NOK) handset operations for more than $7.0 billion. It didn’t take long before Microsoft wrote down that business.

Although Microsoft has had mixed experiences with big ticket acquisitions, LinkedIn is proving to be different in a positive way. LinkedIn’s contribution to Microsoft’s top line has been improving and its losses are also narrowing.

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LinkedIn drives much of the growth

Microsoft generated adjusted revenue of $24.7 billion in its fiscal 4Q17, implying growth of 9.0% from a year earlier. LinkedIn contributed much of the top-line growth because, without it, Microsoft’s revenue for the quarter would have risen just 4.0%.

LinkedIn contributed $1.1 billion to Microsoft’s top line in the latest quarter, up from $975 million in the prior quarter. For all of fiscal 2017, LinkedIn added $2.3 billion to Microsoft’s top line. The above chart shows LinkedIn’s financial details.

Loss-making operation

However, LinkedIn continues to hurt Microsoft’s bottom line. Operating loss attributed to LinkedIn was $361 million in fiscal 4Q17, down from $386 million in the prior quarter.

Despite being a loss-making business, LinkedIn is useful to Microsoft in several ways. For example, Microsoft is leveraging LinkedIn’s data and expertise to boost its software sales, especially cloud-based CRM (customer relationship management) software. Salesforce (CRM) is a fierce rival of Microsoft in the cloud CRM market.


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