Last month Microsoft announced that it has entered into an agreement to purchase GitHub for $7.5 billion, financed entirely by Microsoft stock. Although this deal is roughly one fourth the size of Microsoft’s 2016 acquisition of LinkedIn, GitHub will provide unique opportunities for Microsoft Azure customers. Management expects GitHub to be accretive to adjusted operating income in fiscal 2020.
Props to the what the new CEO Satya Nadella has done, but Microsoft has a long history of buying companies that were supposed to be money makers, but turned out to be dogs : Skype, Nokia handset business, aQuantive
The best acquisitions are ones in which they are mutually beneficial. In this case, I believe MSFT backing GH will bring more companies to GH -- mainly those who are reluctant to use technologies provided by lesser established companies. Additionally, if MSFT makes it easier to link a project to Azure, easier to do continuous integration or application delivery in general, and related crossover between development/code management and deployment/operations, then I think this could be mutually beneficial. What GH has going for it is it's large user base, but this is largely due to open source projects, who are likely to avoid Azure just because it's run by MSFT even if there's no technical reason to avoid it. So many open source projects have chosen to host on GH and because of that it's almost like the de facto open source code host, but that in itself is more of a marketing tool. Will the backing of MSFT bring more revenue to GH+MSFT (Azure) than the lost revenue from the open source hatred of MSFT? I have no idea and therefore no idea if it makes sense to have paid $7.5B. What I do know is that Azure has a lot of room to grow and integrating code management and simplifying related aspects should be mutually beneficial. Whether MSFT will handle this well is another story. They don't have the best reputation among the primary user base of GH.
MSFT earnings this Thursday, July 19. 1-strike OTM July 20 calls will be very cheap. Buy Thursday - Sell Friday.
I'm assuming you're not a developer that utilizes open source technology. A lot of people when they build software use tools generllay called package managers that will download other software requirements for you. So say I want to use some library that will render animated gifs, but it turn depends on some other libraries, that in turn depend on some others, etc. I'd use a package manager to manage these dependencies. Damn near every package manager out there uses github as a default place to look for packages. Sure you can change the default locations, but there are so many development environments, continuous integration/build/test environments, etc that would all be impacted and potentially cause large problems. Sure it can be done. You'd have to host code in both places for a time and do sufficient publicity to get people to update their references, so I'm not saying it can't be done, but it's not simply a matter of just uploading your code to a new place. Sure that's fine for a single project, but because there's so many people and automated systems that assume the software requirements can be found on github, it's actually a systemic problem and I'm pretty sure this is why MSFT wanted GH -- they certainly understand the benefits of controlling something that a large group of software developers depends on and has a certain stickyness. Again, I am not saying it's impossible to leave github. I'm just saying that it would need to be a long drawn out process to prevent cascading problems for thousands of companies.