Software behemoth Microsoft Corporation said that it would buy GitHub, a privately held coding repository website for $7.5 billion in an all-stock deal. The move from Microsoft is seen as a measure to limit Amazon’s AWS. The GitHub deal will likely allow Microsoft to beef up its cloud computing business.
Meanwhile, market insiders are questioning whether Microsoft can ever make profits commensurate with the price it is paying. GitHub was last valued $2 billion in 2015, and it is to make $200 million in revenue this year around. After Microsoft choose to pay 325% premium from Github’s last valuation, it did sound irrational initially, but there is a catch to it.
GitHub is in a sweet spot where millions of open source developers use its platform for code sharing and repositories, are also able to easily deploy their apps on the cloud platform of their choice. GitHub almost acts as a gateway between the developers’ community and the cloud platforms. With cloud revenues reaching billions of dollars annually, the competition is stiff among the top providers. Being native to the developers with their most favorite repository platform adds a huge competitive edge to the cloud providers.
Microsoft’s its own Azure cloud platform, could offer a much more seamless experience for developers in future and incentivize them to switch to its platform.
According to a news post, Microsoft CEO, Satya Nadella said “Microsoft is a developer-first company, and by joining forces with Github we strengthen our commitment to developer freedom, openness and innovation”
Microsoft promised that it would allow GitHub developers to still be able to deploy their apps on any cloud platform of their choice, which includes Google’s Cloud, and Amazon’s AWS.
According to people close to the matter, it was actually GitHub which approached Microsoft, and Google, for a sellout. Microsoft however, sealed the deal.
It will be interesting to see what plan Microsoft has hatched, to turn GitHub into a billion-dollar making platform.