Microsoft’s New Hub

Image source:

What's going on?

On Monday, tech titan Microsoft announced its acquisition of GitHub – the popular open-source software hub – for $7.5 billion (tweet this).

What does this mean?

GitHub’s a tool that’s most familiar to software developers. It works a bit like file-sharing site Dropbox but allows its users (including big dogs like Apple and Google) to save and share software code instead. GitHub was valued at $2 billion back in 2015 and was considering an Initial Public Offering (IPO), but decided it’d rather buddy up with Microsoft.

Why should I care?

For markets: Microsoft’s stock booted up.

As the news hit, Microsoft’s stock moved up 1% (which, for a company worth $776 billion, is pretty big) as some investors praised the company’s return to its software programming roots (remember Windows, anyone?). Microsoft hopes the acquisition will bring it closer to the developer community – GitHub has some 27 million users working on improving 80 million sets of code on the platform, so that’s a start…

The bigger picture: It’s not always great to be bought by Microsoft.

Microsoft has a patchy history with acquisitions: its 2011 purchase of Skype saw it run up against tough competition and ultimately undergo a serious facelift in order to stay relevant. And it wrote down the value of its entire 2014 Nokia acquisition to zero just a year after buying it. Ouch. The jury’s still out on 2016’s $26 billion purchase of LinkedIn…

Microsoft’s used its own stock (which has surged about 40% in the last year) to pay for GitHub, so perhaps it’s learning to take a little less risk with its deals. With over 1,000 employees contributing to GitHub’s repository, Microsoft hopes it’s well positioned to steer the combined company into a profitable future (since GitHub’s currently making a loss).

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Hush Money

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.