Buying GitHub Would Take Microsoft Back to Its Roots

For Microsoft Corp., acquiring GitHub Inc. would be both a return to the company’s earliest roots and a sharp turnaround from where it was a decade ago.

The software maker has agreed to acquire GitHub, the code-repository company popular with many software developers, and could announce the deal as soon as Monday, according to people familiar with the matter.

Microsoft’s origin story lies in the market for software-development tools. Decades before former Chief Executive Officer Steve Ballmer jumped up and down on a stage, cheering for "developers, developers, developers," Bill Gates and Paul Allen co-founded the company to give hobbyists a way to program a new micro-computer kit, the MITS Altair.

But even as Ballmer celebrated the developers building proprietary software for Microsoft, in the early 2000s he and his executive team were highly critical of the kind of open-source program built in GitHub today. Open-source software allows developers to tinker with, improve upon and share code -- an approach that threatened Microsoft’s business model. A lot has changed since then, and under CEO Satya Nadella, Microsoft is supporting many flavors of Linux and has used open-source models on some significant cloud and developer products itself.

Redmond, Washington-based Microsoft is now one of the biggest contributors to GitHub, and as Nadella moves the company away from complete dependence on the Windows operating system to more in-house development on Linux, the company needs new ways to connect with the broader developer community.

GitHub preferred selling the company to going public and chose Microsoft partially because it was impressed by Nadella, said one of the people, who asked not to be identified discussing private information. Terms of the agreement weren’t known on Sunday. GitHub was last valued at $2 billion in 2015.

Frank Shaw, a spokesman for Microsoft, declined to comment. GitHub didn’t return an email seeking comment on a potential agreement.

San Francisco-based GitHub is an essential tool for coders. Many corporations, including Microsoft and Alphabet Inc.’s Google, use it to store their corporate code and to collaborate. It’s also a social network of sorts for developers. Still, GitHub’s losses have been significant -- it lost $66 millionover three quarters in 2016 -- and it has been hunting for a new CEO for nine months. The company had revenue of $98 million in nine months of 2016.

In August, GitHub announced that it was looking for a CEO to replace Chris Wanstrath, one of the company’s co-founders. In the interim, GitHub’s Chief Business Officer Julio Avalos joined the company’s board of directors and took over much of the day-to-day leadership of the company.

Microsoft has talked to GitHub, which hosts 27 million software developers working on 80 million repositories of code, on and off for a few years. Recently they began talks about a partnership but progressed to discussing an acquisition, according to another person familiar with the situation.

Business Insider first reported talks between the companies on Friday.

Source :- Bloomberg