Microsoft acquires GitHub for $7.5 billion

GitHub

Microsoft is acquiring GitHub, the largest code repository in the world, for $7.5 billion, the companies announced on 4 June. GitHub, an online community for software developers to collaborate and share code, has never been profitable, though it was last valued at $2 billion in 2015. The company is host to a community of 28 million developers who maintain a total of 85 million code repositories. While GitHub offers a free version of its service to developers willing to share code, it began charging for private storage on the service six months after its launch.
GitHub is used by many developers and big tech companies including Apple, Amazon, Google, Facebook, and IBM to store their corporate code and privately collaborate on software, but Microsoft is one of the top contributors to the web-hosting service.
GitHub was acquired for close to 30x annual recurring revenue (an astronomical multiple). To put this in perspective, Microsoft acquired LinkedIn, the job-oriented professional social network, for $26 billion in 2016 (7.2x revenue), in what was considered one of the richest tech deals ever.

The decision has brought fear among some developers at open source community, with some Twitter users proclaiming the death of GitHub and open source software. The concern is completely rational and understandable. Despite the company’s lack of a CEO and money, Github holds a privileged position in the software development ecosystem and plays a critical role. Microsoft, on the other hand, has once opposed to such open-source software development, with its ex-CEO Steve Ballmer describing Linux as “cancer”. This changed over the years, Microsoft has been actively pushing open source technology and the company has open sourced PowerShell, Visual Studio Code and the Microsoft Edge JavaScript engine. Microsoft also partnered with Canonical to bring Ubuntu to Windows 10 and acquired Xamarin to assist with mobile app development.

Microsoft recently integrated Visual Studio App Center and GitHub, to help GitHub developers automate DevOps processes as they build mobile apps for iOS, Android, Windows, and macOS devices. Visual Studio App Center enables mobile developers to build, test and distribute mobile apps to a variety of different devices, including iOS and Android, monitor the performance of those apps and collect analytics and crash dumps to iteratively improve their apps. Additionally, integration with Microsoft’s Azure DevOps Project lets GitHub developers configure a DevOps pipeline and connect it to the cloud with no prior knowledge.These are moves that have been met with surprise by developers initially, but that have earned respect.

GitHub will now be led by CEO Nat Friedman, the founder of Xamarin, who will report to Microsoft’s Cloud and AI chief Scott Guthrie. GitHub CEO and co-founder Chris Wanstrath will now become a technical fellow at Microsoft, also reporting into Guthrie.
Microsoft killed its own GitHub competitor, Codeplex, in December and is now the top contributor to GitHub. Microsoft now has more than 1,000 employees actively pushing code to GitHub repositories.
In a blog post, Chief Executive Satya Nadella said Microsoft plans to “accelerate enterprise developers’ use of GitHub” by selling the service through Microsoft’s sales channels. He also expects GitHub to bring Microsoft’s developer tools and services to new customers. Microsoft said the GitHub acquisition is expected to have a negative impact on 2019 earnings but positive beginning in 2020.