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June 16, 2016

Microsoft swoops on LinkedIn


June 16, 2016

When an entrepreneur, albeit a very successful one, talks about something being “a refounding moment”, the alarm bells should immediately start ringing.

That’s how Reid Hoffman, co-founder and chairman of LinkedIn, described Microsoft’s decision to part with $26bn to take over the professional networking site.

Hoffman went on to say he saw an “incredible opportunity for our members and customers and look forward to supporting this new and combined business”.

What Hoffman perhaps should have said, is that this is an incredible opportunity for him. The 48 year-old, who founded LinkedIn 13 years ago with just 350 of his own contacts, stands to make a staggering $2.9bn from the sale, thanks to his 11pc stake.

Of course, the fact that Hoffman stands to make so much money, isn’t reason alone to doubt this deal. In fact, there are plenty of others – tens of billions to be precise, which is what Microsoft has squandered on botched deals over the years.

There is a rich history of bungled M&A deals in the technology sector but Microsoft is the anti-Midas of deal-making, at least in Silicon Valley – with so much of what it touches ending up worthless. The biggest catastrophe was of course Microsoft’s takeover of Nokia.

If ever there was a piece of empire-building that showed the desperate lengths chief executives will go to in an attempt to rediscover a company’s mojo, it is Steve Ballmer’s decision to splurge $7.2bn on the mobile phone business of the once-mighty Finnish telecoms giant in 2013.

Losing ground to Apple and Android in the smartphone stakes, Microsoft’s wacky boss believed turning Microsoft into a “devices and services” company, was key to the company’s continuing survival.

With more than 82pc of all Windows Phone sales coming from Nokia hardware, Ballmer was insistent that his grand plan wouldn’t work without the tie-up.

It turned out to be a final act of folly from a man who was bowing out after 13 years at the helm and one of the most disastrous deals of all time.

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