June 9, 2018
On Monday, Microsoft announced it will acquire GitHub for $7.5 billion in stock. The deal should close later this year. This move marks another strategic shift by Chief Executive Satya Nadella to diversify Microsoft from its legacy products.
You can read Nadella’s commentary about the acquisition here.
What is GitHub?
GitHub is the largest host of source code in the world. Developers can host and review code as well as manage projects through the GitHub platform. More than 1.8 million businesses and organizations use GitHub. Through the power of collaboration, developers can write better code. They can also purchase apps from the GitHub marketplace to implement the tools they need for their projects. The platform caters to all levels of software development from personal projects to Fortune 500 initiatives.
The Wall Street Journal reports GitHub received nearly four times its initial valuation by private investors three years ago at $2 billion. The deal marks Nadella’s second largest acquisition at Microsoft following LinkedIn which it acquired for $27 billion. GitHub earns by charging its corporate clients. The private company does not report its revenues or profits so financial performance remains nebulous.
Why Microsoft Needs GitHub
First, Microsoft aims to catch up to its local Seattle rival, Amazon in cloud computing services. Both Amazon and Alphabet, Inc. showed earlier interest in acquiring GitHub. Offering access to GitHub applications via Microsoft cloud services will certainly help bolster the customer base.
Previously, former Microsoft CEO Steve Ballmer declared open source web development as the enemy or a threat to IP. Since then, open source development has become so popular that it’s causing the major players to change their tune.
Nadella credits GitHub for providing a home for the world’s developers. These developers he emphasizes are building the new era of the digital world. Developers will remain at the center of solving the world’s most pressing challenges through digital transformation. Analysts do not believe the acquisition will initially drive substantial revenue for Microsoft but will service the growing developer community for which Nadella sees as paramount for the future of the company and the world.