Paying $8.4 billion for Skype or even $1.2 billion for Yammer could both be considered wasteful spending of shareholder money, not to mention the disasters that the $5.5 billion AQuantive and $7.2 billion Nokia acquisitions ended up being. Those acquisitions became write-downs of $6.2 billion and $7.6 billion, respectively.
But, Microsoft's purchase of $26.2 billion purchase of LinkedIn looks like it will be different.
First, the other acquisitions took place prior to Satya Nadella's time as chief executive. Although he has only been at the helm for a relatively short period of time, there has been a big shift in direction under his leadership.
In one of Nadella's first acts as chief executive, he sent an email to employees with his new official mission statement, "To empower every person and every organization on the planet to achieve more."
According to the company's website, "At Microsoft, our mission is to enable people and businesses throughout the world to realize their full potential."
Either way, Microsoft clearly wants both businesses and individuals to do more.
Meanwhile, LinkedIn's mission statement is "Our mission is simple: To connect the world's professionals to make them more productive and successful."
The visions sound similar.
The acquisition gives Microsoft the ability to better compete with Alphabet, Apple, Facebook, Salesforce.com and Twitter without spending billions trying to build a sub-par website product. Microsoft instantly gains invaluable data, which many think will help boost the company's products, including its artificial intelligence and machine learning projects, as well as its customer relationship management services.
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One Wall Street analyst said that Microsoft's Help and Yammer business products could be improved once LinkedIn's Lynda.com is integrated.
But one advantage that few people have mentioned is that in the very competitive Silicon Valley technology world, Microsoft may now have a slightly higher edge when it comes to finding the best engineers and candidates.
Also, LinkedIn should help Microsoft become more profitable.
Analysts expect LinkedIn to report earnings before interest, taxes, depreciation and amortization of more than $1 billion this year, more than $2.3 billion by the end of the 2020 and $3.1 billion by 2022.
Also, most of LinkedIn's revenue is domestic, so that is more money for shareholders that can actually be used without double taxation.
Despite having more than $100 billion in cash, Microsoft plans to borrow money to pay for LinkedIn.
Although there are a few reasons for this, such as extremely low interest rates and because most of that money is in overseas banks, which would cost the company billions in taxes to bring it back home, borrowing the money will help Microsoft save on taxes. Because Microsoft is borrowing the $26.2 billion to purchase LinkedIn, it is estimated that Microsoft will save about $9 billion in corporate taxes this year due to tax deductions on the interest payments.
Microsoft shareholders sold the stock on Monday when the purchase was announced, and shares closed down 3%.
Long-term investors should have been buying because this acquisition will result in a different outcome than past purchases for Microsoft. Wall Street doesn't understand this yet, so investors would be smart to buy Microsoft's stock before others figure it out.
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This article is commentary by an independent contributor. At the time of publication, the author held positions in Alphabet, Apple, Facebook, LinkedIn, Microsoft, Salesforce and Twitter.