Published: Mon, October 29, 2018
Money | By Hannah Jacobs

IBM buying North Carolina-based Red Hat in $34B deal

IBM buying North Carolina-based Red Hat in $34B deal

At $190 a share, the deal values Red Hat at a 63 percent premium over its closing price Friday on the stock market. Shares of IBM slumped in premarket US trading. "IBM will become the world's". Hell, Red hat is a billion dollar company - yes, billion with a "B".

IBM has unveiled plans to acquire open source specialists Red Hat, in a blockbuster US$34 billion deal created to bolster the tech giant's hybrid cloud capabilities.

And the complication? The deal is being pitched as making IBM and Red Hat the premier hybrid cloud company. "This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimising every part of the business, from supply chains to sales".

IBM to Acquire Red Hat for $34 Billion
IBM to acquire open-source software firm Red Hat for $34B

With this acquisition, Rometty said IBM will "remain committed" to Red Hat's open governance, open source contributions, participation in the open source community and development model, while also "fostering" its widespread developer ecosystem.

While IBM's current position as a public cloud provider doesn't seem that impressive as compared to Amazon, Microsoft, and Google, the company plans to offer their combined technology to link their in-house cloud and other third-party cloud solutions.

Rometty noted that most companies are still only about 20 percent along their way to the cloud. By effectively buying itself a cloud that spans several IaaS rivals, IBM shows its own IaaS ambitions have dimmed.


Competition is growing increasingly fierce for the cloud business, though. In doing so, they will draw on their shared leadership in key technologies, such as Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation.

Raleigh, N.C. -based Red Hat makes software for the open-source Linux operating system, an alternative to proprietary software made by Microsoft. "Together we can become *the* leading hybrid cloud solutions provider".

Venero's message for IBM CEO Rometty: "The simple message for Ginni Rometty is, 'Don't forget the channel partners who helped bring Red Hat to the level that it is today in enterprise accounts'".


In May the two companies unveiled a collaboration agreement to target the hybrid cloud sector through technology and services integration in a move to accelerate cloud adoption.

"Imagine Red Hat with the ability to invest even more and faster to accelerate open source innovation in emerging areas". In particular, they said they are committed to open-source efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network. She has been trying to steer IBM toward more modern businesses, such as the cloud, artificial intelligence and security software with inconsistent results.

In an interview with CNBC, however, IBM Chair and CEO Ginni Rometty said IBM didn't pay too steep a price. The question is how IBM's might and largesse in the digital world will influence the open source OS.


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