Microsoft's (NASDAQ:MSFT) acquisition of LinkedIn (NYSE:LNKD) this year wasn't the first approach made by the U.S. technology giant to buy the firm, one of the professional networking site's founders told CNBC.
"Since the early days, Microsoft had a standing offer to our VCs," Konstantin Guericke declared, stating MSFT had approached the company before he left in 2006.
But the entrepreneur, along with other co-founders including current chairman Reid Hoffman, felt the site still had a long way to grow at the time and didn't see the need to sell out.
Reuters reports Microsoft (MSFT +0.6%) has offered to maintain open access by competitors to LinkedIn (LNKD +0.1%) and provide hardware manufacturers the ability to install a variety of services as the company continues to seek European Union approval of its LinkedIn purchase.
Favoring of LinkedIn over rivals and packaged products making operation more difficult for other services, the latter something European Commission regulators have gone after Google for, are considered main concerns held by the agency, ones these measures are intended to ease.
A formal, definitive ruling on the deal is expected December 6.
Speaking at WSJ.D Live in California, Salesforce (NYSE:CRM) CEO Marc Benioff described the recent pair of key acquisitions that got away.
Twitter: "We've never had a deal leak before... We had to stop because I'm running the business in partnership with my shareholders."
LinkedIn: "We really liked some of the business fundamentals, [as opposed to Microsoft executives which] specifically said they will create a product that will create a barrier to entry of other companies."
Salesforce (NYSE:CRM) CEO Marc Benioff, who recently lost a bidding war for LinkedIn (NYSE:LNKD) to Microsoft (NASDAQ:MSFT), would have made a stronger bid for the social network had it continued talks with him after its call for final offers.
Persistent bidding by Salesforce - during the two months before LinkedIn's agreement to negotiate exclusively with Microsoft - ultimately raised the price of the deal by 22%, or $5B.
Salesforce (NYSE:CRM) was bidding for LinkedIn (NYSE:LNKD) before the professional social network agreed to a $26.2B deal with Microsoft (NASDAQ:MSFT), sources tell Bloomberg.
There was already speculation Salesforce (currently has a $55.3B market cap) or another third party was vying to acquire LinkedIn, given Microsoft is paying a near-50% premium to where LinkedIn traded before the deal was announced. LinkedIn's recruiting/jobs products would've complemented Salesforce's cloud CRM apps, and its user data could've been integrated with the apps. LinkedIn's Sales Navigator social selling tool already syncs with Salesforce's apps.
Last year, Salesforce was reported to have held buyout talks with Microsoft that fell apart due to disagreements over price.
Microsoft (NASDAQ:MSFT) will fund the deal mostly by issuing debt, with LinkedIn's (NYSE:LNKD) results to be reported as part of MSFT's Productivity and Business Processes segment. EPS is expected to take a minimal hit in fiscals 2017 and 2018, but the deal should become accretive beginning in fiscal 2019.
The purchase is expected to close this year.
Microsoft still intends to complete its current $40B buyback plan by year-end.
Jeff Weiner will remain CEO of LinkedIn, reporting to Microsoft chief Satya Nadella.
Nadella: "Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the planet.”
A rumor among traders that Microsoft could be looking to acquire LinkedIn (LNKD +2.8%) appears to be helping the beaten-up professional social networking leader rally on a quiet day for tech stocks. Volume is moderate - 2.3M shares vs. a 3-month daily average of 3.9M.
Of note: Twitter has spiked on several occasions on similar kinds of rumors. In each case, the rumor didn't pan out.
LinkedIn's Q1 report arrives on the afternoon of April 28. Shares are down 47% YTD, after getting crushed in February due to the weak guidance issued with a Q4 beat.
While discussing its 2016 guidance, LinkedIn (NYSE:LNKD) says it expects its field sales hiring solutions business to see mid-20% growth in 2016, after exiting 2015 at 30% growth. The outlook is said to reflect "continued pressure in EMEA and APAC given current global economic conditions," and single-digit growth for self-serve products. It also doesn't assume "meaningful contribution" from LinkedIn's Referrals and new Recruiter products.
Also: For its Marketing Solutions (ad) business, LinkedIn is shuttering its Lead Accelerator product as a standalone offering, and incorporating its technology into the Sponsored Updates ad product. The move is expected to have a short-term revenue impact. Nonetheless, LinkedIn forecasts Marketing Solutions will "accelerate in 2016."
Meanwhile, spending will stay aggressive: Capex will equal a high-teens % of 2016 revenue, and aggressive investments will be made for LinkedIn's Sales Solutions and Learning & Development (formerly Lynda.com) platforms.
Q4 sales/traffic details: Talent Solutions revenue (62% of total) +45% Y/Y to $535M - hiring revenue +32% to $487M, Learning & Development revenue totaled $49M. Over 3K corporate solutions accounts were added, raising the total above 42K (+29% Y/Y); LinkedIn won't disclose this metric going forward. The add-on/renewal rate "decreased moderately" Y/Y.
Marketing Solutions +20% to $183M, with Sponsored Updates surpassing 50% of segment revenue and display ad sales dropping by a high-30s % amid ongoing "secular-driven headwinds." Premium Subscriptions +19% to $144M, with Sales Navigator providing a lift. LinkedIn notes general subscriptions are now growing only at a single-digit rate as subscribers migrate to products such as Job Seeker and Recruiter Lite.
Registered members rose by 18M Q/Q to 414M. Unique visiting members only rose 7% to 100M (57M mobile). Member page views +26% to 37B. The U.S. was 61% of revenue.
Financials: 2015 free cash flow was $300M, up from just $21M in 2014. GAAP costs/expenses rose 39% Y/Y in Q4 to $877.9M. On a non-GAAP basis, sales/marketing spend was 31% of revenue, R&D 18%, G&A 11%, and cost of revenue 12%. LinkedIn ended 2015 with $3.1B in cash and $1.1B in convertible debt.
In other news, LinkedIn has announced it's buying Connectifier, a startup that has developed A.I.-based search technology for helping recruiters find job candidates. LinkedIn, which bough job search engine/listing platform Bright in 2014, says Connectifier will "further strengthen our core products and accelerate our product roadmap, leveraging powerful machine learning-based searching and matching technology to help recruiters and hiring managers find the perfect talent fit."
"There are natural synergies we see with a combination, both strategic and financial, and we see an easy fit within LinkedIn’s (NYSE:LNKD) business model," writes Topeka's Victor Anthony, praising the Lynda.com acquisition. He admits the purchase is expensive - with Lynda having posted 2014 revenue of ~$150M, LinkedIn is paying 10x trailing sales - but (like others) also sees "a compelling opportunity" for cross-selling.
Macquarie's Tom White observes LinkedIn could offer premium subscriptions that bundle Lynda's courses, and that it can use its data to pitch users on Lynda services. Cantor's Youssef Squali calls the purchase "another significant step toward building the world’s first economic graph."
Re/code's Kurt Wagner notes Lynda could help LinkedIn make further inroads with students, and that the companies' missions align. "LinkedIn aims to connect people with job opportunities. Lynda.com aims to connect people with an education about those jobs."
Discussing the deal with Wired, CEO Jeff Weiner argues there's an opportunity to translate Lynda's material into Chinese and other languages. He also suggests the content could boost LinkedIn's user engagement (a historical issue for the company), and that LinkedIn could use its publishing platform to identify potential Lynda contributors.
Shares are up 4.8% since the deal was announced, and about $12 away from a high of $276.18. Q1 results arrive on April 30.
Lynda.com provides thousands of online courses and video tutorials (often tied to learning software programs or Internet services) via subscriptions sold to individuals, businesses, and academic and government institutions, and in partnership with professional "authors."
The company was founded in 1995, has over 500 employees, and and had 2013 revenue of $100M (+43% Y/Y) while turning a profit. Its courses cover fields ranging from core business skills to photography/video to IT training.
LinkedIn (LNKD -1.2%) is buying Lynda.com for $1.5B - 52% in cash, 48% in stock. The deal is expected to close in Q2. "Most" of the company's employees will be joining LinkedIn.
LinkedIn CEO Jeff Weiner: "Lynda.com's extensive library of premium video content helps empower people to develop the skills needed to accelerate their careers. When integrated with the hundreds of millions of members and millions of jobs on LinkedIn, lynda.com can change the way in which people connect to opportunity."
LinkedIn exec Ryan Roslansky: "Imagine being a job seeker and being able to instantly know what skills are needed for the available jobs in a desired city, like Denver, and then to be prompted to take the relevant and accredited course to help you acquire this skill."
Other recent LinkedIn acquisitions: Refresh (meeting preparation app), Careerify (recruiting software), Bizo (business ad services), Bright (analytics-driven job search engine/listingplatform)