Microsoft's 'SaaS Buy' Doesn't Have Positive Implications For Twitter And Social Media

Microsoft Corporation (NASDAQ: MSFT) announced it was acquiring LinkedIn Corp (NYSE: LNKD) for $196 per share. MKM Partners’ Rob Sanderson maintained a Neutral rating on LinkedIn, while raising the price target from $130 to $196.

Impact on Social Media

Sanderson mentioned that following the announcement, the stock rose to $192, representing a discount of less than 2 percent on the offer price.

“We disagree that MSFT’s bid has positive implications for Twitter Inc (NYSE: TWTR) or other social media platforms,” the analyst stated.

Sanderson believes this acquisition is an attempt by Microsoft to bolster its offerings “to empower knowledge workers,” rather than being an acquisition that was intended to boost its consumer Internet offerings.

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Microsoft intends to roll LinkedIn into the Productivity and Business Process segment, with core synergies focused on Office 365, Dynamics and Azure, rather than Bing, MSN and other Internet properties.

“MSFT is a flagship customer of LNKD’s Sales Navigator product. We believe the company sees great promise here and thinks they can create value by absorbing LNKD,” Sanderson noted.

Other Bidders Unlikely

The analyst also pointed out that the acquisition price was a discount to other SaaS providers, as well as recent transactions.

However, the $23.6 billion bid in cash sets a high bar, with Oracle Corporation (NYSE: ORCL) and SAP SE (ADR) (NYSE: SAP) being the only other software companies that had the resources to compete.

“We see potential synergies with CRM, but with a $55Bn market cap and $1.3Bn in cash, a higher bid would be transformative and carry a heavy stock component,” Sanderson said, while adding that a higher offer wasn't expected.