Shares of Microsoft Corporation (Nasdaq: MSFT) have been on a steady uptrend over the past couple of months, rising about 11% since mid-October. And while Microsoft stock hasn’t crushed the S&P 500 index to the extent of banking stocks since the election, the world’s largest software company — fresh on the heels of the closing of its $26.2 billion blockbuster deal for LinkedIn Corporation– is nonetheless trading at all-time highs. And with LinkedIn now under its umbrella, Microsoft resembles a startup, given the many new markets it can pursue and growth opportunities it can take.

#-ad_banner-#Indeed, with Microsoft having landed its social network prize, the hard work of integrating LinkedIn must begin. While there is a ton of execution risk tied to the merger, Microsoft CEO Satya Nadella has established a strong track record of pushing the right buttons at the right the time. Combined with momentum the company has established in the cloud with Office 365 and its dominant Azure platform, Microsoft is no longer just a PC-centric business. So, despite the seemingly pricey stock or the associated risk with integrating LinkedIn, it would be a mistake to exit a MFST position now. 

What LinkedIn Brings To The Table
With LinkedIn now in hand, the hard work begins to use the professional social network to strengthen Microsoft’s dominance on the business world. With ghosts of deals gone bad still haunting the company — i.e. Nokia Corporation’s (NYSE: NOK) mobile phone unit and digital marketing service aQuantive — Microsoft has a lot to prove. Though it deserves a mention that these deals were pre-Nadella.

Microsoft has tons of ways it can make this deal work. For instance, Microsoft might be able to handle LinkedIn similar to how it dominated the browser industry when it integrated Internet Explorer into Windows at the height of the internet boom. Though Microsoft did offer several concessions to anti-trust regulators with regards to a “level playing field,” hardware manufactures would have to include LinkedIn as part of the packaged bundle if they want to remain competitive.  

Large OEMs such as HP Inc. (NYSE: HPQ), Lenovo Group Limited (OTC: LNVGY), and Dell (NYSE: DVMT) would have no incentive to go in any other direction other than to include LinkedIn as part of their PC bundles. Microsoft, which hinted at more M&A deals to complement LinkedIn, was also strategic in the fact that it allows LinkedIn CEO Jeff Weiner to remain in charge of his company. To that end, Microsoft has discussed ways to combine LinkedIn’s professional content feeds into Windows, which would allow non-LinkedIn users to have access LinkedIn material.

Changing The Job Market
It was clear that LinkedIn, which has some 470 million registered members of which 25% visit the site monthly, had gone as far as it can go as an independent company. However, by virtue of LinkedIn’s Windows integration in Windows, Microsoft will now have the ability to convert new PC shoppers into LinkedIn members. As it stands, this deal puts Microsoft in realm of Facebook, Inc. (NASDAQ: FB) from the standpoint that Microsoft is now the go-to player in professional social networks, compared to Facebook’s monopoly on friends and family. 

In that vein, it’s reasonable to expect Microsoft to leverage its access to the home and business to push its cloud services such as Office 365 and Azure to LinkedIn’s users, which include both consumers and corporations. Combined with its dominant Outlook email program and the growing popularity of video service Skype, few (if any) challengers can compete with the powerful suite of productivity tools Microsoft offers. 

Imagine receiving a LinkedIn job notification into your Outlook email with a link that takes you immediately to a video interview on Skype. One would never have to be late for an interview, while businesses competing for candidates across the country will save time and money. Plus, in the era of artificial intelligence and digital personal assistants, Microsoft can change the game by figuring out ways to fully immerse Cortana into LinkedIn’s news feed and notifications. Allowing Cortana to dictate calendar updates and any changes that might be necessary based on current events or a new notification would set Cortana apart from Apple’s (Nasdaq: AAPL) Siri or Alphabet’s (Nasdaq: GOOGL) Google Home.

An Opportunity In Advertising?
Why not? And if you’re thinking “what an odd concept” for Microsoft to sell ads, it would be LinkedIn that’s selling the ads, which is the company’s business model anyway. Recall, we’ve already determined that Microsoft will allow LinkedIn to operate as a “standalone entity” with Weiner leading the charge. LinkedIn, as with Facebook, collects tons of data on its members. Many of whom, for instance, provide what they consider their strengths and weaknesses to be. 

If I’ve listed my weakness as a procrastinator, maybe I might be interested in, say, a Tony Robbins video set. It’s just an idea. And with both giants operating under the same umbrella, Microsoft will have this powerful database to provide members with tools and resources they need to grow professionally. As users grow, so does Microsoft, thanks to its LinkedIn deal. And what do you suppose will happen to Microsoft stock? It will grow too. My target for 2017 is $72 per share, yielding a 15% return from current levels.

Risks To Consider: Much of my optimism is based on the assumption that Microsoft can successfully integrate LinkedIn. As with startups, failure to execute or any missed projections by management will pressure Microsoft’s share price.

Action To Take: Microsoft should be kept on the watch list of investors who are looking for a company that pays a solid 2.50% annual dividend yield and has an opportunity for increased growth ahead.

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