The Hidden Mystery Of LinkedIn Acquisition And Disposal Of Feature Phone Business By Microsoft

LinkedIn acquired for a little more than $26 Billion and in the last week of May, Microsoft sold of feature phone business to Foxconn for $350 Million. The usual prediction for all people would be that Microsoft is suffering a handsome loss from their deal of Nokia but taking a look at their quarterly revenues, we get a totally different picture.

Furthermore this Linkedin acquisition presents an even stranger outlook for most who would be thinking that Twitter would have been a better option like me. But before we go into all that, let's go into Microsoft's Earning Reports for this Fiscal Year:

Quarterly Revenue Figures

Here are some stats from Microsoft's own Earnings calls:
  • Q1 2015 Revenue was $23.20 billion while Q1 2016 Revenue was $20.4 billion. That's a loss of $2.8 Billion from the previous quarter. Windows 10 and Cloud Business experienced growth.
  • Q2 2015 Revenue was $26.5 billion while Q2 2016 Revenue was $23.8 billion. That's a loss of $2.7 Billion from the previous quarter yet Cloud continues to bring in revenue.
  • Q3 2015 Revenue was $21.7 Billion while  Q3 2016 Revenue stood at $20.5 billion. That's a loss of $1.2 Billion compared to the previous Quarter. Windows 10 is active on 270 Million devices.

And here compiled version of the above statements in graphical form with a prediction of revenue in the Fourth Quarter

The prediction will be explained later on.

What These Figures Mean?

If we focus entirely on these figures then everyone would get the impression that Microsoft performance is in a dismal state. However that is not the case, only in the Fourth Quarter of 2015 did Microsoft report a loss in earnings. Otherwise they are on an upward track slowly building their Cloud Revenues and Windows 10 is also going up in user base, rather slowly, but it is going up.

The Mystery Of Linkedin Acquisition

Thy Acquisition of Acquisitions!
 Linkedin is a corporate social network and the home of entrepreneurs, companies, Job Owners, seekers and enthusiasts alike. It is also regarded as the worst social network in today's era because it only appeals the corporate user.

However many users have been able to connect, share their ideas as well as find jobs and interact with big corporate entities. How many are talking about here? More than 400 million members and US users are just shy of 130 million. Microsoft just got its hands on a mammoth user base and one which is intelligence and conscious.

Benefit To Microsoft

By getting its hands on LinkedIn, Microsoft now has the opportunity to offer Businesses its products upfront. And by upfront, I literally mean knocking on the door of your house upfront. Satya explained that LinkedIn offered a chance for Microsoft to expand its Dynamics division and further strengthen their stance "Mobile-first, cloud-first". The quarterly revenues I mentioned up there always had special emphasis on the cloud products such as Azure as well as stressing on the growth of Windows 10 user base.

And speaking of Windows 10 user base, Microsoft could also offer Windows 10 Enterprise Editions to Entrepreneurs, Businesses and other people who have their accounts on LinkedIn. No pressure on annoying Windows 10 upgrade ads, rather a discount for a specific business and a chance for them connect. Going further, they could also offer their SQL services and Azure Cloud features etc. Outlook Services and LinkedIn were meant for each other. 

And Why Not Twitter?

When I first saw this news, I was absolutely baffled. First it was LinkedIn, Second the amount of money Microsoft is chunking out for this purchase. This begs to question why Microsoft didn't go to the Heads of Twitter for its purchase instead. Because Twitter has about 310 million users in the first Quarter of 2016 alone.

The attraction is not Majority of users. It's the kind of users which interest Microsoft. They didn't target general public nor do they intend too. Their focus is entirely on Business and Corporate Sector and this is the Segment where LinkedIn has the greatest advantage. You can say it's an approach similar to that of Apple and BlackBerry. Target the premium users and make them loyal. You will be in loss for some time but the returns per decade will be greater than imagination.
And if you can get this, the reasoning of disposal of Feature Phone reasoning will be made Simple too!

Disposal Of Feature Phone Business

Microsoft is again trying to become a Software company. The emphasis is purely software regardless of their Xbox and Surface products. Acquisition of Nokia saved it from a potential demise since they didn't intend to integrate Android in their phones any time soon and this lesson was also learned by Microsoft the hard way. They were forced to introduce a modded version of Android for their Lumia X series. 
But that didn't work out well either.
So you now go back to square one. Introduce premium phones but only in a low quantity. Only 3 to 4 phones a year aimed at Lower end, budget based, mid end and flagship categories to appeal the masses. This will draw exclusive users who have deep interest in Microsoft products and services. They will keep on coming for the years to come and draw the attention of other people too. Which is actually a good step on Microsoft's part because only a few percentage of people are buying feature phones. Smartphones have become a streamline market. But attract even the premium user, Microsoft needs a portfolio for its Windows Store. It doesn't even have the extremely popular Clash of Clans. Consider what other basic apps it would be missing based on this very example. Therefore this area needs attention at the earliest to attract the conscious user. More emphasis on this point has already been discussed by me in a previous article.

Explanation of Decrease In Revenue For Q4 2016

I believe that despite the above strategies implemented by Microsoft, this quarter will show a loss in their revenues. They might actually lose their foothold from the $20 Billion mark which they have been maintaining the past few years. Reason being is the incredible amount money spent on LinkedIn. It will indeed bring in Revenues but for this year, Microsoft will have to record an unprecedented loss.

They could have been covered by Windows 10 Revenues and might be, depending on how Windows 10 Anniversary edition fares out but currently Microsoft is embroiled in Privacy issues in their latest OS which has become the main source of criticism and scare for the general user. However if they resolve these issues and implement the above stated suggestions for the Smartphone department, there's a chance they would make a comeback.

That's pretty much from me folks. Are you impressed by the steps Microsoft has taken this year so far?

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