EconMatters has distinctly bearish remarks about Microsoft’s acquisition of GitHub:
The reason Microsoft doesn`t mind overpaying for GitHub by 4.5 Billion is because they know their stock is way overvalued by historical standards in a non bubble market. In fact they remember the last time their company’s stock was this overvalued back in 2000, and what happened after the tech bubble popped in 2000? Artificially high paper stock price valuations plunged and were as worthless as toilet paper in many cases. Microsoft realizes their stock isn`t worth $102 a share, it will be less than $50 in the next three years conservatively. So this is basically a free roll for them, paper stock values means you haven’t lost anything by buying a company with future worthless stock at these valuation levels.
Hint for GitHub be smart like Mark Cuban in the last tech bubble, cash out your Microsoft shares ASAP because these shares will be losing value every month that goes by. Mark Cuban was smart enough to cash out those worthless Yahoo Shares they paid for his bogus company, and now he still has money, you better do the same if you want to keep the winnings of your recent lottery luckbox.
In fact, every technology company should buy anyone they want to acquire right now because all their shares are going to be dropping precipitously over the next three years as the technology 2.0 market crash begins. Artificially high paper gains never last and high P/E Ratios for declining revenue growth companies like Microsoft, Apple, Intel, Cisco and the like all revert back to historical norms. Your stock prices are all artificially high due to the Central Bank Liquidity Punchbowl Bonanza so overpaying for companies with future worthless stock is a good idea, and essentially a freeroll.
I don’t honestly know whether there’s a tech bubble. It may be that stocks like Microsoft are seen as safe havens and will attract money if for no other reason that there’s no better alternative around. That will be easy enough to test. Just watch the stock prices of “declining revenue growth” tech companies.
As to the fate of GitHub itself, I know of no case in which a tech company acquired a competitor and both products survived. In general the purchaser’s product survives, possibly incorporating some worthwhile technology from the acquired company sometimes not. There are good political reasons for that; the acquiring company’s own products already have an internal constituency.
Microsoft already has a product competitive with GitHub—it’s part of Team. So expect GitHub to bite the dust and its paying users brought into the Team fold. Microsoft is an old hand at this game. They’ve been doing it for 30 years.
Memory says GitHub was one of Linus Thorvald’s notions, so it may be an entity that Microsoft can acquire and fit into its holdings, but the underlying software is basically free to all the world. Microsoft may wish to turn what they’ve bought to proprietary form, but if it starts to become inconvenient for independent software developers, odds are a second generation GitHub will suddenly appear and people will migrate to that, just as they did from SourceForge to the first GitHub.
And yes, SourceForge is still around, suggesting that even after MS has finished “acquiring” GitHub, there’s still going to be something left behind which acts like GitHub and probably points to it by name.