Microsoft Corporation: Is This a Tipping Point for MSFT Stock?

Microsoft StockGood News for Microsoft Stock (MSFT)?

The European Commission is set to approve Microsoft Corporation’s (NASDAQ:MSFT) $26.0-billion acquisition of LinkedIn Corp (NYSE:LNKD), but not without some caveats. Nonetheless, we believe this event could trigger a surge in Microsoft stock (MSFT).

Regulators don’t appear to hate the deal, but they still want to err on the cautious side. Or, at least that’s according to a report from The Wall Street Journal that came out last Thursday. (Source: “EU Likely to Clear Microsoft-LinkedIn Deal With Conditions,” The Wall Street Journal, December 1, 2016.)

Here’s what we know:

  1. Microsoft made “concessions” to ensure smooth passage of the deal,
  2. Microsoft can’t shut out LinkedIn’s competitors from its “Outlook” programs, and
  3. No one but Microsoft gets access to LinkedIn’s treasure trove of data.

In other words, the “concessions” aren’t so bad. In fact, Microsoft would be foolish not to accept such incredible terms. The European Commission may prevent the company from bundling LinkedIn with other products, but that wasn’t the point of the acquisition.

Microsoft was after the data all along. There are 400 million working professionals with accounts on LinkedIn. With the data that underlies these accounts, Microsoft can make its programs better, its artificial intelligence (AI) smarter, and its share price more valuable.

Forget the teenagers taking selfies on “Snapchat.” The real value is in working adults with enough money to buy things. Understanding how they think and how they use technology is key to building successful products in the 21st century. Data is at the heart of that understanding.

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What This Means for MSFT Stock

Just to recap: LinkedIn’s competitors will be able to integrate their apps with Microsoft’s Outlook products.

That won’t be an exclusive right of LinkedIn, even though it will technically be under Microsoft’s banner. Rivals like the network for German business professionals, XING AG (FRA:O1BC), will also have access to Outlook’s e-mail and calendar services. It could impede LinkedIn’s growth, but so what?

On the totem pole of things that matter, LinkedIn’s growth is near the bottom. It is already a widely used platform. The point now is to use it to the advantage of Microsoft stock. With this in mind, I can’t help but see the “concessions” to the European Commission as a good thing.

If you’re still skeptical, listen to this. There was one company that was pushing for Microsoft to share LinkedIn’s data: salesforce.com, inc. (NYSE:CRM). Folks at salesforce.com kept lobbying the commission, pushing them to rule against Microsoft. Why, you ask?

Because they know how valuable LinkedIn’s data is. In fact, salesforce.com was one of the other companies trying to buy LinkedIn, but it was outbid by Microsoft. Now it is simply trying to limit the advantage that Microsoft will have over its pool of rivals.

Unfortunately for salesforce.com, the deal has already been approved by antitrust authorities in the U.S., Canada, Brazil, and South Africa. Other big markets, like those in Japan, South Korea, and China, don’t require regulatory approval.

With the European Commission expected to give its final approval on December 6, we suspect MSFT stock may break above its 52-week trading average in the coming days. The share price is currently hovering at $59.02.