As I wrote earlier, Microsoft CEO Satya Nadella was a driving force behind the deal, and he today said Microsoft is a developer focused company. By taking GitHub, Microsoft now has the company’s 28 million dev’s. Expected to close later this year, the deal is unlikely to change GitHub as Microsoft says the company will continue to run independently. Below is the full press release from Redmond: [04.06.2018 – 13:33 CET] “Microsoft is a developer-first company, and by joining forces with GitHub we strengthen our commitment to developer freedom, openness and innovation,” said Satya Nadella, CEO, Microsoft. “We recognize the community responsibility we take on with this agreement and will do our best work to empower every developer to build, innovate and solve the world’s most pressing challenges.” Under the terms of the agreement, Microsoft will acquire GitHub for $7.5 billion in Microsoft stock. Subject to customary closing conditions and completion of regulatory review, the acquisition is expected to close by the end of the calendar year. GitHub will retain its developer-first ethos and will operate independently to provide an open platform for all developers in all industries. Developers will continue to be able to use the programming languages, tools and operating systems of their choice for their projects — and will still be able to deploy their code to any operating system, any cloud and any device. Microsoft Corporate Vice President Nat Friedman, founder of Xamarin and an open source veteran, will assume the role of GitHub CEO. GitHub’s current CEO, Chris Wanstrath, will become a Microsoft technical fellow, reporting to Executive Vice President Scott Guthrie, to work on strategic software initiatives. “I’m extremely proud of what GitHub and our community have accomplished over the past decade, and I can’t wait to see what lies ahead. The future of software development is bright, and I’m thrilled to be joining forces with Microsoft to help make it a reality,” Wanstrath said. “Their focus on developers lines up perfectly with our own, and their scale, tools and global cloud will play a huge role in making GitHub even more valuable for developers everywhere.” Today, every company is becoming a software company and developers are at the center of digital transformation; they drive business processes and functions across organizations from customer service and HR to marketing and IT. And the choices these developers make will increasingly determine value creation and growth across every industry. GitHub is home for modern developers and the world’s most popular destination for open source projects and software innovation. The platform hosts a growing network of developers in nearly every country representing more than 1.5 million companies across healthcare, manufacturing, technology, financial services, retail and more. Upon closing, Microsoft expects GitHub’s financials to be reported as part of the Intelligent Cloud segment. Microsoft expects the acquisition will be accretive to operating income in fiscal year 2020 on a non-GAAP basis, and to have minimal dilution of less than 1 percent to earnings per share in fiscal years 2019 and 2020 on a non-GAAP basis, based on the expected close time frame. Non-GAAP excludes expected impact of purchase accounting adjustments, as well as integration and transaction-related expenses. An incremental share buyback, beyond Microsoft’s recent historical quarterly pace, is expected to offset stock consideration paid within six months after closing. Microsoft will use a portion of the remaining ~$30 billion of its current share repurchase authorization for the purchase. Simpson Thacher & Bartlett LLP is acting as legal advisor to Microsoft. Morgan Stanley is acting as exclusive financial advisor to GitHub, while Fenwick & West LLP is acting as its legal advisor.” Late last week reports pointed to Microsoft’s interest in acquiring GitHub, with talks said to be serious. Now, Bloomberg is reporting talks have moved on and the companies have reached an agreement for the purchase. Indeed, Microsoft could announce the deal as early as today. The source code repository has apparently been on Microsoft’s radar for some time. Indeed, there have been persistent rumors for years that the company would eventually buy GitHub. It seems that interest has moved into full swing with news GitHub’s CEO Chris Wanstrath is set to leave the company. According to a source close to the deal, Microsoft CEO Satya Nadella has been a defining factor in the transaction. Instead of going public, GitHub chose to sell to Microsoft because of Nadella’s influence, which has impressed the company. Specifically, Nadella has driven Microsoft forward as a company that is open-source friendly. That is certainly a change to previous generations when Redmond was closed to open source software. In recent years, Microsoft has joined the Open Source Initiative (OSI). GitHub has been at the center of the company’s move to the open source community. Microsoft shuttered its own open source hosting site CodePlex in 2017. That aligned with the company becoming the biggest contributor to GitHub.
Changing Times
As for how much Microsoft is expected to pay, GitHub was valued at $2 billion in 2015. Since then the value of the company has probably gone up, so Microsoft will likely have to pay more. Now that this deal looks likely to happen, it will point towards Microsoft heading back towards its roots. At the start of the company, Microsoft was open to developers. While the company kept attempting to woo dev’s in the late 90s, it became openly hostile in some scenarios. Through the turn of this century the company started to go to open war against open source. Former CEO Steve Ballmer even described open-source Windows rival Linux a “cancer”.
