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Microsoft Buys LinkedIn for $26.2 Billion in Cash Deal


Tuesday June 14, 2016 – SEATTLE — Microsoft has made its most ambitious move in years to reassert itself in a technology market it once dominated.

The software giant said Monday morning that it would acquire LinkedIn in a $26.2 billion cash deal. The acquisition, by far the largest in Microsoft’s history, unites two companies in different businesses: one a big maker of software tools, the other the largest business-oriented social networking site, with more than 400 million members globally.

The deal is Microsoft’s biggest bet yet that the traditional software business is shifting quickly to cloud computing, a model in which customers rent software and other services delivered over the internet. While LinkedIn does not have the household name of Facebook, a much larger and more lucrative social network, it is the most widely used site for people to advertise their professional skills and work history.

It is also further evidence that Satya Nadella, Microsoft’s chief executive, sees the company’s future further and further removed from the PC software that once helped the company’s co-founder Bill Gates turn Microsoft into the world’s most valuable company.

Though they operate in different businesses, Microsoft and LinkedIn make most of their money by catering to professionals. Executives involved in the deal said that the common thread prompted the acquisition.

“This deal is all about bringing together the professional cloud and professional network,” Mr. Nadella said in a telephone interview.

Mr. Nadella, who took over as chief executive in February 2014, was not involved in those deals. Since assuming leadership of the company, he has made mostly smaller acquisitions, with the exception of the $2.5 billion deal to acquire the maker of the game Minecraft.

Mr. Nadella said that when Microsoft pursued deals that hewed closer to a strict set of criteria, one of which is that the acquired company operates in areas that are core to Microsoft’s business, the deals have worked out.

“Every time we’ve gotten it right, we’ve had success in those dimensions,” Mr. Nadella said.

In a joint interview, Mr. Nadella and Jeff Weiner, the chief executive of LinkedIn, said that their conversations began in February, when the two began talking about different ways in which the companies could work together.

Mr. Weiner, for his part, said he began thinking about a LinkedIn combination with Microsoft long before he sat down with Mr. Nadella. He and Mr. Nadella first met a couple of years ago at a conference for chief executives at Microsoft’s headquarters.

“I’ve had a lot of admiration for the work Satya had done since taking over as C.E.O.,” Mr. Weiner said.

Microsoft was once a reviled company in Silicon Valley, where LinkedIn is based, but as its dominance in the industry ebbed it came to seem far less threatening.

Mr. Nadella has further improved Microsoft’s image in the technology industry by being more open to partnerships with once-bitter tech rivals like Salesforce.com. He has accelerated the company’s shift from traditional software to cloud applications and services, and its stock has risen significantly under his leadership.

And with more than $100 billion in cash and short-term investments as its disposal, Microsoft is an attractive suitor for companies that decide they are better off joining forces with a bigger entity.

Microsoft is paying considerably less for LinkedIn than it would have just last fall, when LinkedIn shares were trading over $260 a share. Disappointing earnings helped slash the value of the company. The deal calls for Microsoft to pay $196 a share to buy LinkedIn, a healthy premium to the $131.08 its shares closed at on Friday.

“This is a good time for LinkedIn to sell,” said Michael A. Cusumano, a professor at the Sloan School of Management at M.I.T. “They lost money last year. They’ve found it’s very expensive to keep growing. They’re probably as valuable as they will ever be.”

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