Microsoft plugs in code developing platform GitHub for $7.5 billion

Last weekend, there were unconfirmed reports that Microsoft (MSFT) plans to acquire open-source platform GitHub. The tech mogul that acquired AI start-up Semantic Machines in May confirmed the news by announcing that it will indeed buy GitHub for $7.5 billion in an all-stock transaction. Already, Microsoft is the most active organization on GitHub, which has over 28 million developers on its platform and is used by over 1.8 million businesses and organizations worldwide.

As a developer-focused company, Microsoft plans to empower developers at every stage of their development lifecycle. The company will accelerate enterprise developers’ use of GitHub with its direct sales and partner channels and access to Microsoft’s global cloud infrastructure and services. This deal will also enable Microsoft to offer its developer tools and services in the GitHub marketplace.

When the deal is closed, GitHub will operate independently and continue to remain as an open platform. Also, the San Francisco-based company will be led by CEO Nat Friedman, an open-source veteran, and its current CEO Chris Wanstrath will be a technical fellow at Microsoft.

The transaction, which is targeted to close by the end of 2018, is expected to have a minimal dilution of less than 1% to non-GAAP EPS in FY19 and FY20 and will add to operating income in 2020 on an adjusted basis. On closing, GitHub will be reported under Microsoft’s Intelligent Cloud division, which registered a 17.3% growth in the recently ended third quarter. Microsoft will use a portion of the remaining $30 billion of its current share repurchase authorization to buy GitHub.

Wall Street has welcomed CEO Satya Nadella’s strategic move as Microsoft stock reached its new 52-week high during today’s trading. However, there is an opinion that the price paid by Microsoft for GitHub is too high and some people are skeptical on how the tech giant is going to make the open-source platform generate revenue for it.