Deutsche Bank Positive On Microsoft, LinkedIn Deal

Deutsche Bank’s Karl Keirstead mentioned checks with customers and investors suggest their view of the Microsoft Corporation MSFT and LinkedIn Corp LNKD deal is “mixed to slightly cautious.”

Keirstead maintains a Buy rating on Microsoft, with a price target of $65.

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“Our initial view of the deal didn’t fundamentally change. We like the fact that MSFT is acquiring to raise its revenue growth trajectory and that MSFT’s first mega-deal under the new CEO was in the enterprise SaaS/cloud arena,” the analyst stated.

Related Link: LinkedIn's Dataset May Give Microsoft An Edge Over Google, Amazon

With this deal, Microsoft’s cloud revenues could reach 25 percent of its total revenues by FY18, possibly representing the highest cloud mix among mega cap technology incumbents.

Accretion Expected

Keirstead also expressed optimism regarding EPS accretion in FY18, “encouraged by the bullish feedback about LNKD’s Recruiter tool from customers.”

However, the analyst pointed out that many investors were still struggling to perceive the revenue synergies, with recent checks suggesting that recruiter seat penetration was high in the enterprise segment, driving a deceleration in LinkedIn’s talent solutions segment.

The deal is expected to close by the end of the calendar year 2016.

The revenue and EPS estimates for Microsoft for FY18 have been raised.

At Time Of Writing...