Microsoft Corporation (NASDAQ:MSFT) Investors Can’t Be Too Pleased With LinkedIn Corp (NYSE:LNKD) Purchase

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You thought maybe Microsoft Corporation (NASDAQ:MSFT) had learned their lessons. That out the door with former CEO, Steve Ballmer was also the company’s track record of eviscerating cash on questionable acquisitions.

Microsoft’s Notable Big Purchases
  • 2007 $6.3 billion for aQuantive, which was subsequently written down to nearly zero in 2012.
  • 2011  $8.56 billion for Skype, 18 months after Silver Lake purchased 70% of Skype for a mere $1.9 billion.
  • 2013  $7.2 billion for Nokia’s Mobile Phone Business, which was subsequently written down to zero, just two years later in 2015.

Almost $14 billion in write-downs

In the last 4 years, Microsoft has taken almost $14 billion in write-downs from its acquisitions, an admission that they have not panned out. aQuantive and Nokia’s Mobile Phone Business have been written down to nearly zero.  The purchase of Skype is harder to track at this point but Microsoft could have had the business for far less money just 18 months earlier.

LinkedIn Acquisition

Microsoft has to prove the purchase of LinkedIn Corp (NYSE:LNKD) for $26.2 billion is not just a page out of the same old playbook of the past, a reminder to investors that no matter how much cash Microsoft generates, there is a large probability the company will throw a giant chunk of it to some questionable purchase.

Nadella on Acquisition

In a memo to employees, CEO Satya Nadella detailed how he believes that the acquisition will align with their core business and overall sense of purpose. He cites the example of new experiences in which a LinkedIn newsfeed serves up articles based on the project you are working on and connects you with an Office expert to help with the task. He believes that this will accelerate LinkedIn’s growth, and that the opportunity for Office 365 and Dynamics is just as profound.

Conclusion

Time will tell whether this works or not, but history has shown large acquisitions have a questionable history and integration can be very difficult. Maybe Nadella will prove us all wrong, or maybe this will be just another event that makes shareholders question Microsoft’s use of the cash pile they generate.

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