What does Linkedin really mean to Microsoft?

Microsoft has stirred up a swirling buzz of discussion around the Linkedin acquisition for $26.2 billion. There are a number of angles that have been considered in the gazillion news stories floating around. Here’s a few of those threads:

  • Linkedin is a Salesforce counter by Satya Nadella — It has been argued by Steve Nellis and others that Linkedin’s efforts at developing and selling the tools in the company’s Sales Solutions unit have not gone very far, but the data in Linkedin’s network — when coupled with Microsoft’s own Salesforce competitor — Dynamics — could become a real player. Note that Nadella’s rumored efforts to acquire Salesforce stalled because of a too-high price tag (10X revenues), while Linkedin was much more affordable (7X revenues). Plus, with Linkedin in there are other angles to play.
  • Linkedin is a professional social network, and could counter Facebook for Business — Facebook has not yet released its business variant, Facebook for Business, but it’s supposed to roll out this year. Nadella might be trying to get there first by offering a fusion of Linkedin’s current mix of blogging, social networking, and recruitment use cases with Office 365 productivity options. Linking together the professional graph (Linkedin) with the work graph (Office 365)– as Nadella talked about in a call with the NY Times — and getting a premium on the integration of the two is probably a smart move so long as the seams can be made low friction. There is a devil in these details, but this is one of the most powerful visions for the merger.
  • Linkedin alone was a company with real problems — Linkedin stock got hammered earlier this year after lowered sales estimates. This would be bad in itself but doubly bad for Linkedin, since many of its best and brightest are compensated in part by stock grants, so when the stock falls, so does compensation. As a result, Linkedin was facing a mass exodus unless they could right the boat. This is one of the reasons Microsoft got the terms that it did. And now, people will be compensated in the more standard Microsoft way (as will the accounting for these expenses, which were clouded by non-GAAP practices).
  • Microsoft sees Linkedin as a way to deflect Slack — Personally, I don’t buy this conflation of threats to Microsoft. Yes, Slack is making huge inroads in work technology — specifically as the defining product in the exploding work chat space — but just because is has some of the features of a ‘social network’ (in that people are logged in for long periods of time each day, message each other, can coordinate outside of company boundaries) that doesn’t mean Slack and Linkedin are in some way head-to-head competitors. Yes, Slack is a competitor to Microsoft’s productivity/work technology products — most specifically Yammer, but also the core functionality slowly growing in Office 365 — but that doesn’t mean that Linkedin is intended as a Slack killer. Although Microsoft should be working on that, as well. I just don’t expect it will come from the Linkedin side of things.

After all the dust settles I expect that we’ll see a reoriented Linkedin, with a greater focus on CRM technologies and networking, and also a much enlarged focus on people operations (HR) technologies and networking, an area that Microsoft has functionally no offerings. This will take the form of enlarged platforms, and an ecology of partners building on Microsoft/Linkedin capabilities, as well as other, subsequent acquisitions. And Linkedin will immediately find its operational core — and culture — pulled toward CRM and HR by the Microsoft sales operation.
I also don’t believe that Jeff Weiner will be at Microsoft for longer than his required tenure, two years or whatever it is, and Kara Swisher agrees. More likely he will find new worlds to conquer, and Satya will find someone in Microsoft or Linkedin who will better execute what will rapidly become an integration strategy, rather than a trailblazing one.

Exploring Apple’s growing interest in VR content

While it’s no surprise that the presence of virtual reality is weaving its way into many sectors of tech, we’re still left waiting to find out how it’ll unfold when it comes to Apple.

Google, Samsung, Sony, and Facebook have all shared their VR plans, but Apple is remaining silent. Well, mostly silent anyway. Yesterday, Apple confirmed to TechCrunch that it had purchased Swiss startup Faceshift, which develops motion-capture technology. Prior to the acquisition, Faceshift focused on producing motion-capture solutions primarily for gaming and film applications. Most notably, the startup has done work for little film called Star Wars.

Faceshift’s tech integrated with cameras capable of capturing and deciphering depth in a space, then used the visual information picked up by the camera to influence the appearances, actions and facial expressions of digital objects like avatars and animated characters.

So, what does Apple want with Faceshift? In typical Apple fashion, it gave a stock non-answer when asked about how it plans to use Faceshift. That leaves us to speculate on how, exactly, Apple plans to leverage the work of the company that helped bring Star Wars characters to life. First, though, let’s talk a little bit about what Faceshift was doing prior to being snatched up by Apple.

Faceshift’s most recognizable and noteworthy work is obviously with Star Wars, but its tech has a number of applications that go beyond visual effects in film. One such application was in avatars.

Though avatars are frequently used in gaming, the recent uptick in interest in virtual reality and augmented reality applications has seen many content companies from game studios to film studios rethinking the way in which we see ourselves represented digitally. No longer are avatars simply a cartoonish representation of our online selves on Xboxes and Playstations — they’ve shown the potential to become key components in the way we perceive ourselves in a digital world.

Faceshift has also dipped its toes into augmented reality, using its tech in conjunction with mirrors. In one instance, FaceShift teamed up with AMVBBDO and Pepsi for an AR-based halloween prank that transformed people’s faces into horrifying It-like clown masks. On the less terror-inducing end of the spectrum, possibilities for Faceshift’s mirror tech included the ability to change or modify one’s appearance digitally in a retail setting. Say, for example, trying on a prospective pair of glasses not available in shop or experimenting with a new kind of makeup.

Taking into consideration some of Apple’s other recent acquisitions like Metaio, some degree of AR-application doesn’t seem all that far-fetched. At its core, augmented reality is about allowing users to interact with digital components in space. Virtual reality, by way of comparison, is an immersive experience — one that replaces your current reality with one that lives inside of a headset rather than adding components to your current perceived reality. It’s worth noting, however, that not all applications of AR look like mirror-based pranks, or even Microsoft’s Hololens.

What an Apple foray into AR would look like is difficult to guess. Microsoft has been implementing AR through Hololens for gaming and design purposes, but much of that comes down to the headset. Though certainly not impossible, there isn’t much to indicate right now that Apple’s planning on producing its own headset hardware.

But the reason behind acquiring Faceshift (or even Metaio) might not be augmented reality-related at all. Maybe it’s got more to do with improving features in existing Apple technology, or something security-related, like using facial recognition and mapping to improve device and information security. Or maybe — highly unlikely, but maybe — Apple intends to create its own space opera films.

For now, it’s anyone’s guess how Faceshift might factor into Apple’s plans for the future. But it almost certainly didn’t acquire Faceshift without some seriously sophisticated plans for motion capture and facial mapping technology. And, like always, we’ll be waiting for Apple to read us in.

Pandora acquires Rdio for $75M in cash

Pandora has agreed to acquire key assets from Rdio, a streaming music service that competes with Spotify and similar products, for roughly $75 million in cash.
That’s more than $50 million less than Rdio raised across six rounds of venture financing, according to Crunchbase. Pandora said in a press release that the final figure might change because it’s subject to “certain purchase price adjustments.”
Pandora will acquire Rdio’s technology and talent but not the operating business — which means the Internet radio company won’t be delving into the on-demand streaming business the moment it acquires the portions of Rdio that interest it.
Instead, the company said it plans to “offer an expanded listening experience by late 2016” depending on its ability to “obtain proper licenses.” Pandora, in other words, will give itself some time to assimilate Rdio before it takes on Spotify. (Rdio said it’s service won’t be affected today, but will offer updates on the status in the near future.)
On an investors call following the announcement, Pandora CEO Brian McAndrews said the company opted to purchase Rdio’s assets rather than building it from scratch because Pandora had already determined that it’s strategy was to eventually offer an on-demand component. As such, buying the assets allow Pandora to move quicker, he added.
The deal is a further sign of consolidation in the music streaming market. Apple spent $3 billion on Beats last year, and is shutting down the Beats Music service at the end of the month. Grooveshark, another streaming service, closed in April.
Yet the streaming music market will remain crowded despite that consolidation. Spotify, Apple Music, Amazon Prime Music, Google Play Music, Deezer, Tidal, and other services will continue to vie for attention in this oversaturated space.
This is the second major acquisition for Pandora in the last few months, with the first being a $450 million purchase of ticketing business Ticketfly. Between Ticketfly and the presumably soon-to-launch on-demand component of Pandora, hopefully it’ll be enough to keep it competitive with the slew of rivals.
Investors, however, don’t seem to be very impressed by the development, as Pandora’s stock is essentially flat slightly in after hours trading.

Expedia to acquire HomeAway for $3.9B

Austin, Texas-based vacation home rental service HomeAway today announced that it will sell to travel company Expedia in a deal worth $3.9 billion in cash and stock.
HomeAway makes it easy for people to rent out their homes to folks that would otherwise be forced to book their stay at hotel rooms. It’s business also grew to include rental management services via VRBO and vacation rental search. The company indirectly competes with the likes of Airbnb and a slew of others across the globe.
Both of the company’s boards of directors have approved the purchase, which is still subject to regulatory approval that’s expected to happen in Q1 of 2016. As terms of the deal, Expedia is offering $38.31 per share and offer to buy outstanding shares of common stock for $10.15 + 0.0265 Expedia shares.
“With our expertise in powering global transactional platforms and our industry-leading technology capabilities, we look forward to partnering with them to accelerate their shift from a classified marketplace to an online, transactional model to create even better experiences for HomeAway’s global traveler audience and the owners and managers of its 1.2 million properties around the world,” said Expedia CEO Dara Khosrowshahi in a press release.
Obviously the move makes lots of sense, considering that Expedia is primarily focused on providing a portal (well, several) for people to book all their travel plans. Properties available through HomeAway will likely benefit from the added visibility. For Expedia, the move almost certainly has to do with Airbnb creeping up as a potential competitor in travel booking services, having just recently launched Airbnb Journey.

Dell buying EMC for $67B

In what is the high water market of pure tech acquisitions, Dell has announced that it will be buying EMC in a 67 billion. Shareholders will see a two part deal: $24.05 a share in cash, and a tracking stock that represents VMware, the virtualization subsidiary that EMC controls, and holds 80%: 20% of the shares of VMware are public. Since VMware is a publicly traded company, EMC shareholders will get 0.111 shares of this new VMware tracking stock for each EMC share. The idea of a trading stock is to allow the value of the subsidiary to be represented independently of the financial situation of the parent.
The biggest questions surrounding the acquisition are the amount of debt being taken on to make it happen, and the state of the enterprise technology market.
It’s been estimated that Dell will have to take on more than $40 billion in new debt to finance this deal. Obviously, Michael Dell and his partners — Silver Lake and others that worked with him to take Dell private last year — believe this new debt, on top of the estimated $13.5 billion from privatizing Dell — can be paid off by the new combined entity. And EMC is likely to provide over $55 billion to Dell’s top line, making it the largest enterprise tech company, with combined flows of $80 billion.
EMC has been under the gun, with activist investor Elliott Management stirring up shareholder anger, and arguing that VMware should be spun out or sold off. Joe Tucci, EMC’s CEO was supposed to have resigned in February, but has stayed on to deal with the company’s travails. A rumored deal with HP fell through, which is perhaps why EMC’s board accepted what looks like a less rich offer from Dell.
Is getting bigger actually better, at this juncture in the market? It may lead to more runway in what looks to be a battle of attrition with Amazon on one side — Amazon made a barrage of announcements last week of new offerings in cloud computing to complement the company’s AWS — and open source software, like Hadoop, on the other.
Michael Dell is not one to shy away from making large bets, and it’s likely that this play will provide him and the new, expanded Dell with more strategic options and scope. But there is no doubt that the market he is growing large in is decreasing in overall size. PC sales are dropping steadily, and while Dell has remained the major player in that space — and shrinking less slowly than competitors — the overall trends are fairly clear. However, Dell is now the largest player in that market, and Michael Dell is likely planning on using the cash flow from a market in transition to transition the company into new — and growing — markets. The challenge is to manage that nimble transition over the next five or ten years with an $80 billion/year behemoth. He’s placed his bet, and we will have to wait to see how the chips fall.

Homejoy calls it quits, Google scoops tech team

Deep pockets may be an essential element for competing effectively in the exploding on-demand economy. Today, the on-demand cleaning services company Homejoy announced it was closing shop on 31 July, after encountering stiff headwinds in the one-two punch of legal challenges to the labor status of its cleaning contractors, and the impact on funding that four pending lawsuits was causing.
Homejoy has been confronted by a growing list of court cases, and does not have the deep pockets that other on-demand players like Uber and Handy have. Or for that matter, Google and Amazon have.
As I explore in greater depth in a new research note, Handicapping On-Demand Market Sectors, this sector of thee on-demand economy may be a place where only the strongest survive. In that report, I characterize the slew of Uber-ish companies as on-demand displacers:

Services like Uber, HomeJoy, and Handy are operating in marketplaces where there established companies use a blend of contractors and employees to provide conventional services, like home cleaning or limo/taxi driving. These newcomers are polarizing the debate — and winding up in court — by attempting to maximally displace liabilities, expenses, insurance, regulatory fees, and taxes onto workers (and local governments) while maximizing their control on the way the work is done. These companies want everything to benefit them, for maximum control and profits. This group is going to face many legal challenges, and these on-demand disruptors are drawing the attention of presidential candidates.

Google has confirmed it will be hiring around 20 of Homejoy’s product development team, as it gears up to make a massive push into the home services space. However, it may be employing a very different business model — acting as a broker for truly independent contractors, and not an Uberish umbrella corporation, trying to have it both ways.
And obviously, there is going to be a lot of tectonic change in the foundations of work because of these forces.

Microsoft acquires Wunderlist

I always believed that a productivity toolset requires a task management capability, and Microsoft has just stepped up to the bar on that, acquiring 6Winderkinder, the company behind Wunderlist.
I haven’t looked at Wunderlist since last August (see New releases from Asana, Wunderlist, and Timeful) so I better take a look, and ping them to see what the plans are for integration with other Microsoft tools and platforms, like an integration with Office 365, for example.
(reposted from Microsoft acquires Wunderlist on stoweboyd.com)

Dropbox acquires Pixelapse, a toolset for design management

Pixelapse has announced the company is being acquired by Dropbox:

Pixelapse + Dropbox

We started Pixelapse with the mission of building the definitive version control and collaboration platform for creatives. Since then, we’ve been fortunate to become a part of the daily workflow of tens of thousands of freelance designers and creative teams. The prospect of developing products at Dropbox that expand this vision to millions of users is tremendously exciting.

Our new development efforts will be focused on bringing the same kinds of collaboration and workflow experiences that you’re used to in Pixelapse over to the core Dropbox product. Pixelapse as a standalone product will continue to operate and be supported for the next year as we work towards this goal, at which point we’ll offer a migration plan for your work.

I got my start in technology studying computer science, and worked on program environments: tools for programmers. One of the most essential is version control, where changes introduced into software can be managed very carefully, and various versions of similar bits of software — for example, different compiler back-ends targeting different chips — can be controlled in a single artifact, and by judiciously extracting the correct version could lead to assembling a working chunk of code — for example, a C compiler for BSD Unix running on a 68K chip. The same sort of treatment goes on in document management tools, as well.

I always wondered why someone hadn’t built the same solution for design. It seems that Pixelapse has done so, and now will be rolled into Dropbox.

Pixelapse is another Y combinator alum, and raised an undisclosed amount in two rounds of funding.

Only last week, Dropbox announced the acquisition of Cloudon (see Dropbox acquires Cloudon). The company is on a tear.

Slack acquires Screenhero for voice, video, and screen sharing

Slack has announced the acquisition of Y combinator alum Screenhero, and will be integrating that company’s voice, video, and screen sharing capabilities into Slack over time. Screenhero will continue to operate for existing customers, and starting now, Slack paying customers will be able to use it, as well, but new signups to Screenhero will be blocked. At some point in the future the independent service will be wound down.

Some posts earlier in 2014 at the Screenhero blog mentioned integrations with Hipchat and Flowdock, Slack competitors. I wonder if those will be supported going forward? It seems unlikely, but I will try to find out.

Update 10:35am PT: Katie Wattie (handling PR for Slack) responds that current Screenhero accounts will continue, until the service is fully integrated and then wound down. At that time, independent Screenhero accounts will be closed, and the Flowdock and Hipchat integrations will no longer work.


Dropbox acquires Cloudon

I’ve met with two of the founders of Cloudon — Milind Gadekar and  Jay Zaveri –several times in 2014, and I was unsurprised to learn that Dropbox had stepped forward to acquire the company this week. Cloudon’s newest effort — a tablet document editor that incorporated a novel and intuitive gestural interface (see CloudOn rolls out mobile Microsoft Word compatible co-editor) — is a really ambitious push to challenge Microsoft, and I’m betting that is soon going to be integrated into Dropbox in a smart way.

The two companies declined to state what the deal was, but they have announced that the existing Cloudon products will be shut down on March 15 (Cloudon also has a virtual Office app for iPad: see CloudOn brings Microsoft Office to iPad, but it doesn’t work on my Mac).

Cloudon raised $26 million from a crowd of investors, including The Social+Capital Partnership, TransLink Capital, Foundation Capital and Rembrandt Venture Partners. I’m betting something over $100 million, at least. The company has more than 9 million users, and offices in Israel, San Francisco, Seattle, New York and Dublin, Ireland.

Cloudon’s 30 employees represents the largest single acquisition for Dropbox, and the Israel office will become a center for aggressive hiring for Dropbox, according to reports.