IBM to acquire software company Red Hat for $34 billion

Marcus Newton
October 29, 2018

"The acquisition of Red Hat is a game-changer", Ginni Rometty, IBM's chairman and chief executive, said in a statement.

IBM said Red Hat will continue to build and enhance Red Hat's current partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud.

"The biggest part of the news", Whitehurst said, "is that the company that is bringing us into their fold is committed to keeping the things that have made us Red Hat and that have made us successful over the years, always thinking about the customer and supporting the community as the innovation platform for our success". Microsoft this year acquired open source software platform GitHub for $7.5 billion; chip maker Broadcom Inc agreed to acquire software maker CA Inc for almost $19 billion; and Adobe Inc agreed to acquire marketing software maker Marketo for $5 billion. The question is how IBM's might and largesse in the digital world will influence the open source OS.

Red Hat makes IBM "a credible player in cloud now - both private and hybrid cloud", Bloomberg Intelligence analyst Anurag Rana said. "Red Hat customers that want to remain on-premises are a large upsell market".

IBM's decision to acquire Red Hat for US$34 billion is a bold stroke, an admission of weakness and a mighty complication.

"Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs", Rometty said.

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Rometty, 61, has been trying for years to steer the 107-year-old technology giant toward more modern businesses, such as the cloud, artificial intelligence and security software. While some of that has been from divestitures, most is from declining sales in existing hardware, software and services offerings, as the company has struggled to compete with younger technology companies.

Arvind Krishna, senior vice president for IBM, Hybrid Cloud.

Guggenheim Partners LLC and Morgan Stanley were financial advisers to Red Hat, while Skadden, Arps, Slate, Meagher & Flom LLP offered legal advice to the company on the deal.

Upon closing of the acquisition, Red Hat will join IBM's Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat's open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture. "Together we can become the leading hybrid cloud solutions provider".

"Red Hat was previously able to position itself as the Switzerland for on-premises computing", Mueller said.

Moreover, it's not inconceivable other companies could step in with higher bids that Red Hat shareholders might demand to be taken seriously. But it is expected to close by the second half of 2019.

Other reports by MaliBehiribAe

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