According to the news report by Bloomberg, Microsoft Corp. has agreed to buy the code-repository company popular among developers, GitHub, for $7.5 billion. This will be the tech giant’s third largest deal ever, after the massive $28.1 billion acquisition of LinkedIn and the not so popular $8.5 billion buyout of Skype.
Fortune reports that while this is one of the largest deals made by Microsoft, developers in the industry are a little nervous about this purchase. This is because the tech giant has made high-value purchases in the past that have ended in failure.
For example, in 2013, when Apple and Android smartphones were taking over the mobile communication market, Microsoft bought out Nokia’s mobile phone division for about $7.4 billion. Later on, that figure grew to about $9.2 billion. However, the deal was a failure and two years later, Microsoft had to write off the deal and cut 7,800 jobs in the process – though all those jobs were in that Nokia mobile phone division. Microsoft again had to write off its acquisition of online ad company aQuantive – five years after the technology giant bought the firm.
The thing is, such massive but failed deals had been made during the time of the previous Chief Executive Officer, Steve Ballmer, who stepped down in 2014. Now, Satya Nadella is the CEO. And so far, the biggest deal ever made by Microsoft under his command – the $28.1 billion buyout of LinkedIn – seems to be paying off.
For the first quarter of 2018, revenues from LinkedIn surged 37% to $1.3 billion compared to the same time the previous year. However, it’s been only a year and so analysts and investors alike are adopting a wait and watch attitude towards this new acquisition.
GitHub is a critical tool for coders. Many large corporations use GitHub to store their corporate code and to collaborate with each other. Corporations such as Alphabet’s Google and Microsoft. In fact, Microsoft is one of the biggest contributors to GitHub’s platform.
Yet, despite the fact that the company is key to coders, GitHub has been suffering substantial losses. Over the last 3 quarters of 2016, the company was down $66 million. The coding platform has also been looking for a new CEO for the last nine months – without success.
Microsoft has been talking to GitHub – on and off – for the last few years. These talks, which started out as discussions about a partnership, ended up becoming negotiations for an acquisition.
However, according to CNBC, Microsoft wasn’t the only company interested in buying GitHub. According to inside sources, people from Alphabet’s Google were also negotiating with the coding firm in recent weeks. Amazon had also shown interest in buying the company some time ago. However, at the end of the day, it seems that Microsoft won the bid for GitHub.
According to GitHub, it preferred to sell itself to Microsoft rather than the other companies, or even go public, because the firm was highly impressed with Satya Nadella.
According to those internal sources, Microsoft paid about 25 times the revenue GitHub made, setting the annual revenue for the code-sharing service provider at $300 million. Last year in August, GitHub stated that it was generating about $200 million in revenue and then in October, the company stated that it expected to generate $100 million in revenue from its enterprise products division alone.
With Microsoft’s Windows platform’s market share shrinking, it has become necessary for the company to look at alternatives to keep developers interested in the company. Which is why the tech giant is looking at purchasing GitHub, with its 27 million software developers that are working on more than 80 million repositories of code.