Credit: Shutterstock photoRumor has it that software developer Microsoft CorporationMSFT has expressed interest in buying two-year old cloud computing startup, Mesosphere. The tech giant is reportedly ready to pay $1 billion for the acquisition.
Mesosphere
Mesosphere, launched in 2013, runs on the Apache Mesos technology and provides a solution to easily deploy and manage Mesos clusters on any cloud platform. Mesos clusters are an open source technology that allow easy deployment of complicated applications and even ease workloads by automating operations. It is used by companies such as Twitter TWTR , Vimeo, Airbnb and others.
The commercial version of Mesos is called Data Center Operating System (DCOS), which is a distributed operating system designed to span all machines in a datacenter. It offers methods for deploying applications across the entire system with a few simple commands.
Developers write apps and run them in a container, which can be suitably configured for the purpose. After development, the app can be transferred from their development computers to a container in the cloud from where it becomes available for deployment.
Mesos and DOCS are particularly helpful for developers when there are a very large number of such apps running inside their personal containers.
How would the Acquisition Help Microsoft?
Cloud computing is currently one of the most promising and flourishing areas in the ever-evolving technology sector. This specialized segment represents one of the few growth opportunities left for developed market investors.
Last year, research firm IDC projected that public IT cloud services spending will surge at a five-year CAGR of 22.8% to over $127 billion in 2018. The growth rate is six times higher than that of the broader IT market. In 2018, public IT cloud services will make up over 50% of global software and storage development.
Amid this, a hot new market called "containers" is gaining momentum and this is where Mesosphere comes in. It would be a valuable addition for any company trying to strengthen their cloud computing services, including Google GOOGL , Amazon AMZN , IBM, Rackspace, Cisco and Oracle.
Microsoft is also doing whatever it can to surpass its competitors. Its cloud computing business is the fastest growing business within the company. In the fourth quarter of fiscal 2015, Office 365 subscriptions were up to 15.2 million, a 23% increase from March. Even more significant is that 55% of commercial workloads are premium (and hence will translate into more profits).
Microsoft's cloud business remains extremely strong although growth rates are understandably dropping off as the business becomes larger. Management stated that the company is on track to deliver $20 billion in commercial cloud revenues by 2018.
The addition of Mesosphere to its cloud portfolio will bring in a new wave of infrastructure computing.
Microsoft has a Zacks Rank #3 (Hold).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
