Microsoft Acquires Code Repository GitHub for $7.50 Billion

Microsoft Acquires Code Repository GitHub for $7.50 Billion
June 5, 2018

In 2016, Microsoft Corporation (Nasdaq: MSFT) acquired LinkedIn for $26.2 billion. The largest acquisition in the history of Microsoft drew sharp criticism from industry observers. At that time, the market failed to see a valuable sales channel in LinkedIn. Now, the professional social network contributes $1 billion in revenue every quarter. During the weekend, Bloomberg reported that Microsoft is finalising the acquisition of GitHub, the popular developer tool’s platform, for an undisclosed sum. Yesterday, Microsoft confirmed that it is acquiring GitHub for $7.50 billion. Last month, the company acquired AI startup Semantic Machines. We expect the stock of Microsoft, which has already surpassed Google as the most valuable firm, is expected to rally further in the days to come. The stock of Microsoft ended Monday’s trading session at $101.67.

The San Francisco-based GitHub, which was valued at $2 billion by private market participants in 2015, stores the world’s largest collection of software code in one location. The repository is not only used by small software companies, but also tech giants such as Google, Apple, and even Amazon. Notably, almost all the blockchain companies use GitHub’s repository service.

It can be remembered that the two companies have negotiated an unsuccessful deal a few years back. In fact, last year, there were rumours of acquisition of GitHub for $5 billion. If the acquisition materialises this time, it would be beneficial to both parties. GitHub is struggling to generate profits from its business. It recorded a loss of $66 million over three quarters in 2016. The company has been searching for a CEO for nine months, following the resignation of its cofounder Chris Wanstrath.

Microsoft has been giving importance to open source projects from the time Nadella took over as the CEO and the approach has so far gone favourably for the company. The approach of Nadella is exactly opposite to that of his predecessor Steve Balmer.

Microsoft has open sourced Visual Studio Code, PowerShell, and the Microsoft Edge JavaScript engine.  Of these, Microsoft’s Visual Studio Code has become very popular among developers. The company has also entered into a partnership with Canonical to bring Ubuntu to Windows 10. Furthermore, to assist mobile app development, Microsoft has recently acquired Xamarin. The company also brought SQL Server to Linux. Notably, Microsoft uses the open source Git version control system for Windows development.

A month before, the GitHub’s service was integrated into Microsoft’s App Center for developers.

According to an insider information received by Bloomberg, the company chose to deal with Microsoft partly because it was impressed with the active approach of Satya Nadella.

Microsoft is closely engaged with GitHub over the past few years. The company is a top contributor to the site. More than 1,000 employees of the software behemoth are actively involved in loading codes into GitHub repositories. Even the source code of Windows File Manager is hosted on GitHub.

With access to 27 million software developers who are working on 80 million repositories of code, many industry experts expect Microsoft to introduce innovative softwares soon. However, it all depends on the level of Microsoft’s stake in Github. Furthermore, there is no information regarding the amount of control Microsoft will have over the code. Still, the deal is expected to keep the stock bullish in the short-term.

Technically, the stock has broken the resistance level at 96, after forming an ascending triangle pattern. Now, the level of 96 will act as a major support for the stock. The stochastic oscillator is also in the bullish zone. Therefore, we are expecting the stock to move up in the week ahead.

Microsoft - Technical Analysis - 5th June 2018

We may use one of our binary options trading accounts to acquire a call option contract. Before parking our funds in a call option contract, we would ensure the contract offered by the broker remains active until June 13th. Furthermore, the stock of Microsoft should be trading near $101 in the Nasdaq.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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