The $26.2bn Microsoft paid for business-orientated social networking site LinkedIn is its largest purchase ever. It is the equivalent of buying Nokia (worth $7.9bn) 3.3 times, or Skype ($8.5bn) three times. Unsurprisingly, it has the tech industry in a flutter.

The pressing question has been this: was LinkedIn worth this astronomical price, keeping in mind that Microsoft has a habit of overpaying for companies, only to write down their value later? And has Microsoft made yet another ill-advised attempt at entering a field (social media) it knows nothing about and where it has no foothold, as it did when it attempted to get into mobile by purchasing Nokia in 2014? Two years later, the largest maker of software wrote off most of Nokia’s value ($7.6bn).

This is similar to what Microsoft was forced to do with its other “notable” acquisition, that of aQuantive, a marketing and advising company it bought in 2007 for $6.3bn. In 2012, it wrote off almost the entire value of that acquisition.

That means $13.9bn was written off altogether — half of the value it has ascribed to LinkedIn.

Microsoft doesn’t have a good track record of buying companies in fields outside its core competencies, you might argue. Like Google, which has consistently failed with Wave, Buzz and Google Plus, Microsoft has no skill or aptitude for social media. And this acquisition makes a lot more sense for LinkedIn than for Microsoft. LinkedIn’s share price, user base and income have all been falling.

LinkedIn has 433m registered customers, but only 106m active users. In comparison, Twitter has 310m and Facebook 1.65bn monthly active users.

Microsoft is effectively paying $255/user and a 50% premium on LinkedIn’s share price, but it thinks it can harvest the vast trove of personal data that people upload to the business social network.

So, does buying LinkedIn make sense for Microsoft and the “cloud first, mobile first” strategy of Microsoft CEO Satya Nadella?

Microsoft has turned its Azure platform into the second-largest provider of cloud computing after Amazon, essentially from a standing start.

Microsoft founder and former CEO Bill Gates obviously approves of the purchase. “I think it’s a great transaction,” Gates told Bloomberg.

“LinkedIn brings in a lot. If we can make that as valuable as, say, the Facebook feed in the social world, that’s huge value creation, and that’ll happen over a period of years.”

Nadella is clearly hoping to integrate LinkedIn with Microsoft’s other enterprise-focused products, and perhaps better mine all of its data.

But, as Fortune calculates, Microsoft-owned LinkedIn would need to “generate operating cash flows of $4.4bn, or 15.2% of $28.8bn” to justify its purchase. Problematically, “that’s more than five times the cash that LinkedIn is making right now”.

There is another side to that, however. LinkedIn may not be making money, but it’s become an essential part of the online landscape. I don’t have one of those old-fashioned curriculum vitae documents any more. My professional and career history is my LinkedIn page, like that of the rest of the online world.

But I have never used LinkedIn for its intended primary purpose. I’m neither a recruiter nor a head-hunter, and am notlooking for work via the site. I’ve made a few contacts through it, and I seldom read people’s posts on it.

For what it’s worth, I received an e-mail from LinkedIn a few years ago congratulating me on being user number 69,000 or something. Ask any LinkedIn user and you’ll hear it’s these never-ending e-mails that are also its most annoying feature. “Congratulate so-and-so on his new job or work anniversary” are inbox intrusions as frequent as “people are looking at your LinkedIn profile”.

There’s a joke going around on Twitter that Nadella is buying LinkedIn only to stop these harassing e-mails. Most professionals know the feeling.

Shapshak is editor-in-chief and publisher of Stuff magazine. Follow him on Twitter: @shapshak

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