After LinkedIn, Microsoft acquires GitHub for whopping $7.5 billion

By Deepak Parihar / June 4, 2018

This rumor has been lingering the market for more than a week now, and it’s finally set it out. Microsoft confirmed that it has successfully acquired GitHub - a popular git-based code sharing and collaboration platform. And it wasn’t as cheap as many of us might expect.

After shedding $26 billion on LinkedIn, this turns out to be the second biggest acquisition by Satya Nadella, CEO of Microsoft. Microsoft confirmed to pay $7.5 billion for Github, which is slightly over its current market value. Back in 2015, the GitHub was valued at $2 billion, but in the last couple of years, Github has more than doubled its share value.

The founder of Xamarin, Nat Friedman will head Github as CEO. It is a big responsibility for Friedman considering the 85 million repositories that GitHub hosts and its 28 million contributing developers. GitHub’s current CEO and co-founder Chris Wanstrath will join Microsoft as a fellow technician and report to Scot Guthrie, Cloud & AI chief. Installing a new CEO is a clear indication that Microsoft is planning to integrate GitHub with universal Windows 10 platform and its other products. Microsoft had the same approach with LinkedIn.

It isn’t hard to guess why Microsoft would have acquired GitHub. After killing its own GitHub competitor, Codeplex, in December 2017, it is set to do the much-needed trust building with developers. Microsoft currently employs more than 100 coders to push codes to GitHub repositories.

Being a popular player among the Enterprise and Individual users, GitHub is the largest host of source code in the world. Despite this, GitHub has never turned profits. This could be one of the reasons why GitHub would have decided an acquisition over IPO (Initial public offering). Currently, the main source of revenue for Github is its paid accounts. GitHub charges between $7 to $21 to hold a private repository and offers a set of other features. Although building a public/open source projects on GitHub is free.

The other important factor is that GitHub has plenty of competitions in the source coding space. Some of the popular names are GitLab and Bitbucket, with other enterprise-centric code-sourcing tools.

GitHub clearly fits the Microsoft’s ambition to be the one-stop solution to every developer, irrespective of their platforms. We could see the reflection of this aim in Visual Studio Team Services product, which uses Git protocol. The one benefit that Microsoft has that it’s already a trusted face across many software and services. Microsoft realizes its past mistake and knows that the clever move is to extend this trust and respect to code-sourcing. If Microsoft wants to become a platform where developers come and build things, it has to start from the level one and work on their relationship with the developers.

Microsoft needs to build the bridges that Windows store and Codeplex have once burnt.

“We will accelerate enterprise developers’ use of GitHub, with our direct sales and partner channels and access to Microsoft’s global cloud infrastructure and services,” said Satya Nadella.

The current version of Microsoft is different from the Microsoft from 10 years ago. This change is visible with its new welcoming gesture to open source. It is interesting that Microsoft is currently a member of Linux foundation and consistently backs open source projects. On the other hand, Visual Studio is available on GitHub as an open code editing tool. The biggest change is that Windows itself has adapted to Linux Subsystem. Apart from that, there are various Microsoft-led projects, including .NET Core that Microsoft has pushed to GitHub. The world inside Microsoft is clearly changing.

In the announcement this morning, CEO Nadella said, “Microsoft is a developer-first company, and by joining forces with GitHub we strengthen our commitment to developer freedom, openness, and innovation. “We recognize the community's responsibility we take with this agreement and will do our best work to empower every developer to build, innovate and solve the world’s most pressing challenges.”

Microsoft could build strong collaborations between its own cloud hosting product Azure and GitHub. Also, it can also invest in other integration possibilities. Undoubtedly, this acquisition has so much potential. And it is not just for Microsoft but the entire developer community.

Great things might come out of this deal.

While it is still a mystery that how Microsoft will utilize this acquisition, it will be interesting to see a synergy between these two companies.

What do you think of this acquisition? Let us know in the comments.

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