Why has Microsoft bought LinkedIn?

Buying LinkedIn is the biggest deal done since chief executive Satya Nadella took over in 2014. Photo / Getty

Microsoft has announced a $26.2 billion (NZ$37 billion) deal to buy LinkedIn, the biggest deal in the company's 41-year history.

The acquisition, which will rank as one of the biggest in technology history when completed, underlines how Satya Nadella has changed the company from the days of previous bosses Bill Gates and Steve Ballmer.

LinkedIn, the online social network used by professionals to tap up contacts and headhunters to find recruits, has signed up 433m users since it was founded 14 years ago but has made consecutive annual losses and has suffered heavy falls in its share price.

However, analysts said LinkedIn's treasure trove of data could be hugely valuable when integrated with Microsoft's array of corporate software.

The all-cash deal, which Microsoft will issue debt to help pay for, will result in a major windfall for Reid Hoffman, the Silicon Valley veteran who founded the company and has an 11pc stake as well as majority voting control. Lansdowne, the London hedge fund manager, has a 1.08pc stake worth $354 million.

News of the deal sent shares in LinkedIn up by almost 50pc, while Microsoft's fell slightly. Moody's said Microsoft's increased leverage threatens its prized AAA rating, which it is one of only a handful of companies to hold.

Under Nadella, Microsoft has focused less on selling software to consumers and targeted business customers by selling corporate subscriptions to Office 365, its collection of productivity software such as Word, Office and Outlook, and its enterprise software Dynamics.

The acquisition represents a milestone moment for Microsoft's chief executive, who took charge of the company in 2014 as only the third boss in its history. It is the biggest decision Nadella has taken while in charge, and he will hope that the deal fares better than Microsoft's acquisitions of Skype

In a letter to staff after the deal was announced, Nadella said: "We are in pursuit of a common mission centred on empowering people and organisations... this deal is key to our bold ambition to reinvent productivity and business processes."

Jeff Weiner, LinkedIn's chief executive, will remain in charge of the business and Microsoft promised that "LinkedIn will retain its distinct brand, culture and independence". The deal has been approved by both boards and is expected to close this year, although it will need to be approved by several regulators.