IBM Acquires Open Software Company Red Hat For USD 34 Bn

By  |  July 10, 2019

International Business Machine (IBM) has finally closed a deal we’ve all been waiting for. The tech giant has acquired Red Hat, an open source software business, for USD 34 Bn in cash and debt. The buy, which began late last year, stands as one of the most significant tech acquisitions we have seen, and IBM’s biggest to date. 

IBM is betting so much money on the cloud, particularly for cloud services that marry on-premises and cloud-based architectures. Due to this deal, Red Hat will become a distinct unit within the Hybrid Cloud team of IBM, and will not cease to concentrate on open-source software.

Last month, the American titan won an unconditional EU antitrust approval for the USD 34 Bn deal. Now, all IBM needs to do is execute the projects it looked to while fulfilling its promise to keep Red Hat neutral and led by the current management and CEO Jim Whitehurst. 

According to IBM CEO, Ginni Rometty, having Red Hat in the house makes both companies well-positioned for growth. Red Hat especially, is riper than ever to make the next mark in the cloud, a move that will include a multiplicity of vendors, clouds and systems. In turn, Whitehurst says Red Hat will get the scale necessary to make open source technology “a de facto enterprise standard.” 

In an IBM statement, it was reported that Red Hat will remain watchdogged by Whitehurst, who will now join IBM’s senior management and report directly to Rometty, who has CEO’d the company since 2012. Red Hat’s headquarters in Raleigh, North Carolina will be retained, and its facilities, brands, and practices as well. 

Both companies said IBM and Red Hat would offer “a next-generation hybrid multi-cloud platform” that will be “based on open source technologies, such as Linux and Kubernetes.”

IBM’s cloud strategy has doubled down on assisting companies in stitching together multiple cloud platforms rather than compete head-on with “hyperscale” cloud providers such as Amazon Web Services, a unit of Inc, Microsoft and Alphabet Inc’s Google.

IBM said Red Hat will continue “to build and expand its partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, and Alibaba.” The American tech titan also said that Red Hat is expected to contribute approximately two points of compound revenue growth in half a decade. 

Red Hat, founded in 2003, specializes in Linux operating systems – the most well-known type of open-source software, and an alternative to proprietary software made by Microsoft Corp.

It is reported that IBM has seen its revenue go down in several years, entirely because of its transition from legacy computer hardware into modern tech products and services. 

Featured Image: Techcrunch

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