Microsoft buys LinkedIn for $26.2B
Jun. 22nd, 2016 06:18 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
dennisgorelikThat was unexpected and I even thought it is a joke. But it is not a joke.
Why would Microsoft buy the largest job board?
Microsoft is in a different business.
Responses:
1) What a terrible time to be burning that much cash, just before the next recession, and on a resume site. I was starting to see some good things coming from Microsoft but this makes me shake my head and question leadership big time.
2) I suspect major LinkedIn investors shopped around the company and financial-engineered a sophisticated kickback
Why would Microsoft buy the largest job board?
Microsoft is in a different business.
Responses:
1) What a terrible time to be burning that much cash, just before the next recession, and on a resume site. I was starting to see some good things coming from Microsoft but this makes me shake my head and question leadership big time.
2) I suspect major LinkedIn investors shopped around the company and financial-engineered a sophisticated kickback
no subject
Date: 2016-06-23 12:30 am (UTC)Especially on the buyer's side: what kind of bonuses managers of the buying company gets?
no subject
Date: 2016-06-23 02:16 am (UTC)In any case, 12 years ago it was this:
http://www.law.harvard.edu/programs/corp_gov/papers/04.grinstein.ceo-compensation.pdf
So, it was not always, but only in 39% of the cases (although with a great correlation with the power of a CEO over the board), and for large acquisitions it was between 5 and 14 million.
(The trends like this are all upwards, I presume, but this "39% number" means that one needs to research a specific company before making an accusation like the one I am making here...
For the current Microsoft executive it does not seem to be the case that this bonus is built into the compensation structure automatically, and we'll really need to check in a year comparing to these numbers to see if there is a jump: http://www.geekwire.com/2015/microsoft-ceo-satya-nadella-gets-18-3m-in-annual-compensation-as-board-cites-strong-consistent-vision/
And in this case, his long-term package looks like it is structured to protect against short-term temptations... So I might be wrong applying this thinking to this particular case, even if it is a concern in general...)
Executives motivation for merging
Date: 2016-06-23 04:24 am (UTC)a manager who acquires another company spends extra
time and effort in constructing the deal, and therefore can use the task as a justification for
additional compensation.
---
1) Create busywork for yourself.
2) Ask for higher compensation.
3) Profit.
> http://www.geekwire.com/2015/microsoft-ceo-satya-nadella-gets-18-3m-in-annual-compensation-as-board-cites-strong-consistent-vision/
> his long-term package looks like it is structured to protect against short-term temptations
Where exactly can I see that Nadella's long term package is structured to protect against temptations?
If his bonus is a share of absolute Microsoft profit, then merging with other companies would increase Nadella's compensation even if shareholders would lose money due to merge with LinkedIn.
Re: Executives motivation for merging
Date: 2016-06-23 05:47 am (UTC)(If footnote 2 from the compensation table in the linked text is insufficient in terms of details, there are further materials I've read a few hours ago, but I don't remember the details or urls...
In any case, the bottom line is that I was almost certain that there was a conflict of interest here between his incentives and company's best interests, and now I am not sure, after doing that research prompted by your previous question...
I am now agnostic on that, that's all... His compensation numbers in a year would tell us more...
But I think I'll leave it at that; to come up with a definite conclusion would probably require investing more effort than I want to put into this...
***
I did hear some versions about synergies with LinkedIn which made some sense; like putting all that LinkedIn info into Cortana to assist people in their business dealings with each other, and perhaps even projecting that onto HoloLens eventually... I had a chance to try their HoloLens recently, and it was quite impressive, so they probably take that possibility into account...
Even if it sounds like a risky bet, it's not altogether crazy... The LinkedIn stock curve was also suggestive if one looks at the complete history of that - they've met each other half-way, I would say...
)
Re: Executives motivation for merging
Date: 2016-06-23 05:56 am (UTC)---
http://www.geekwire.com/2015/microsoft-ceo-satya-nadella-gets-18-3m-in-annual-compensation-as-board-cites-strong-consistent-vision/
The cash bonus, representing 120 percent of Nadella’s target, is based on the board’s review of the CEO’s performance.
---
It depends on "the board's review", not on actual gains by shareholders.
> putting all that LinkedIn info into Cortana to assist people in their business dealings with each other
You do not have to buy whole LinkedIn in order to put that data into Cortana.
It could be collaborative research project and if that project shows promise - then do merging.
Or even just license the data.
Why buy the whole company?
Now LinkedIn top management does not have strong incentive to maximize profits or even revenue growth.
Re: Executives motivation for merging
Date: 2016-06-23 01:00 pm (UTC)http://www.geekwire.com/2015/microsoft-ceo-satya-nadella-gets-18-3m-in-annual-compensation-as-board-cites-strong-consistent-vision/
Scroll down, see the big table, stock awards column,
year 2014 row for Nadella, amount 79777109 (read footnote 2 to that table).
I am not saying there is no conflict of interests, I am just uncertain (an agnostic position does not need to be defended much, does it? ;-) )
***
В этих транзакциях нужно иметь в виду, что их мог бы и кто-нибудь другой купить... Плюс для Микрософта состоит в том, что они предотвращают такую возможность...
Re: Executives motivation for merging
Date: 2016-06-23 01:11 pm (UTC)Of course we are uncertain about Microsoft internal cooking.
But do you see anything in Microsoft compensation structure that would motivate Nadella against LinkedIn acquisition (assuming that overall such acquisition would be a net loss for Microsoft shareholders)?
> их мог бы и кто-нибудь другой купить
Why would LinkedIn acquisition by somebody else concern Microsoft?
Re: Executives motivation for merging
Date: 2016-06-23 01:27 pm (UTC)Net loss or no net loss, who cares (they don't count money with this kind of granularity, the stakes in that game are much higher), but if it is again a huge write-off, like with Nokia devices (which were bought before he became the CEO, so he was not responsible for that), there seems to be quite a bit protection built-in against this particular CEO being able to cash on things like that... (I don't think this protection was in place for his predecessor, who accumulated way too much personal power).
***
If a competitor acquires, they might not be open to a licensing or technology deal with Microsoft, and many of them have products competing directly with Cortana and such... So a competitor would gain an advantage, and an opportunity to move forward here would probably be lost forever...
Re: Executives motivation for merging
Date: 2016-06-23 08:35 pm (UTC)Nadella must be totally incompetent in order to kill LinkedIn and loose all $26B.
Much more likely scenario is partial loss. When LinkedIn stagnates or slowly declines.
If Nadella is not penalized for stagnation and slow decline, but gets acquisition bonus - then it is clearly a perverse compensation incentive.
2) Microsoft already has solid investor and business connection with Facebook.
If they need huge social graph for their Cortana algorithm - they have it.
No need to buy LinkedIn for that.
Re: Executives motivation for merging
Date: 2016-06-23 08:53 pm (UTC)But unless it is a publicly visible multibillion-dollar write-off, nobody would care...
Stagnation would not be welcome for Microsoft as a whole, but specifically at the LinkedIn level would not be too much of a problem for Nadella...
***
Facebook is different; MS wants business social graph, that is linkedin, they don't care about causal social... Their business model favors that quite specifically...
Facebook can also become a competitor at any moment, even if the relations are currently good...
Re: Executives motivation for merging
Date: 2016-06-23 10:32 pm (UTC)Spending $26B to protect yourself from something that may possibly happen does not looks like a reasonable purchase.
Re: Executives motivation for merging
Date: 2016-06-24 02:13 am (UTC)http://www.pcworld.com/article/3083064/data-center-cloud/heres-microsoft-ceos-letter-to-employees-about-the-26-billion-linkedin-acquisition.html