Microsoft inks $7.5 bn deal to buy GitHub that posted $98 mn revenue

Microsoft announced it will buy GitHub, a software development platform, for $7.5 billion in stock.

The deal will add to Microsoft’s operating income, including some costs, in its fiscal year 2020. GitHUb reported revenue of $98 million and loss of $66 million in nine months of 2016, Bloomberg reports.
Microsoft GitHub deal
The acquisition provides a way forward for San Francisco-based GitHub, which has been trying for nine months to find a new chief executive officer and has yet to make a profit from its popular service that allows coders to share and collaborate on their work.

It helps Microsoft, which is relying on open-source software, to add programming tools and tie up with a company that has become a key part of the way Microsoft writes its own software.

The deal is Microsoft’s largest since the $26 billion acquisition of LinkedIn in 2016. Microsoft is betting on its fast-growing cloud business that competes with market leader Amazon.com Inc, Reuters reported.

The software giant’s Azure cloud platform reported a 93 percent growth in revenue in the third quarter ended March 31.

GitHub will operate independently and named former Xamarin CEO and current Microsoft developer tools executive Nat Friedman as its chief. GitHub will support the programming languages, tools and operating systems of the user’s choice.

For Microsoft, acquiring GitHub is both a return to the company’s earliest roots and a sharp turnaround from where it was a decade ago.

Microsoft’s origin story lies in the market for software-development tools, with co-founders Bill Gates and Paul Allen focused on giving hobbyists a way to program a new micro-computer kit.

But that vision of software tools was applied very differently under both Gates and former CEO Steve Ballmer, who championed developers building proprietary software for Microsoft, not the kind of open-source projects found on GitHub.

In the early 2000s, Steve Ballmer and his team were critical of that kind of a project. Open-source software allows developers to tinker with, improve upon and share code — an approach that threatened Microsoft’s business model.

Under current CEO Satya Nadella, Microsoft is supporting many flavors of Linux and has used open-source models on some significant cloud and developer products itself. This deal will mark another dramatic step in that direction.

“Microsoft is a developer-first company, and by joining forces with GitHub we strengthen our commitment to developer freedom, openness and innovation,” Satya Nadella said in a statement.

Redmond, Washington-based Microsoft is one of the biggest contributors to GitHub, and as Satya Nadella moves the software company away from complete dependence on the Windows operating system to more in-house development on Linux, the company needs new ways to connect with the broader developer community.

San Francisco-based GitHub is an essential tool for coders. Many corporations, including Microsoft and Alphabet Inc.’s Google, use it to store their corporate code and to collaborate. It’s also a social network of sorts for developers.

In August, GitHub announced that it was looking for a CEO to replace Chris Wanstrath, one of the co-founders. In the interim, GitHub’s Chief Business Officer Julio Avalos joined the company’s board of directors and took over much of the day-to-day leadership of the company.

GitHub hosts more than 28 million software developers working on 80 million repositories of code.

GitHub was last valued at $2 billion in 2015, making today’s deal a win for GitHub backers like Sequoia Capital and Andreessen Horowitz.

Image: Chris Wanstrath (left), Github CEO and co-founder; Nat Friedman, Microsoft corporate vice president, Developer Services; Satya Nadella, Microsoft CEO; and Amy Hood, Microsoft Chief Financial Officer.