Sunday, 18 November, 2018

IBM set to acquire Red Hat for $34 billion

IBM is reportedly nearing a deal to acquire Red Hat, the software company valued at $20 billion Official: IBM to gobble Red Hat for $34bn – yes, the enterprise Linux biz
Lindsey Cook | 29 October, 2018, 15:31

While AWS and Microsoft haven't had much trouble courting those companies, IBM and Red Hat will attempt to argue that they'll offer the most "open" approach to the hybrid cloud given Red Hat's open-source legacy and their commitment to helping those companies navigate multiple public cloud options, which can be very complicated at older companies that lack cutting-edge IT talent.

The transaction is by far IBM's biggest acquisition.

If you ask IBM, the deal is all about the cloud.

They added that for the deal to work, it was important for IBM to uphold Red Hat's neutrality when it came to operating platforms and maintain Red Hat's open-source and multi-cloud position in the market.

IBM announced Sunday it will acquire North Carolina-based open-source software company Red Hat in a $34 billion stock deal that the technology and consulting giant's chief executive says will advance the company to the next step in cloud computing.

In its second-quarter results, Red Hat missed revenue estimates and issued guidance below analysts' predictions, but its subscription revenue was still up 20 percent YoY to $722 million. "The next 80% is about unlocking real business value and driving growth". "This is the next chapter of the cloud".

"Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience - all while preserving our unique culture and unwavering commitment to open source innovation", Whitehurst said in the statement. In other words, an open cloud provider improved by Red Hat's decades of knowledge in Linux and open source.

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One of IBM's main competitors, Dell Technologies Inc, made a big bet on software and cloud computing two years ago, when it acquired data storage company EMC for $67 billion.

Red Hat, which was founded in 1993, was originally started as an alternative to Microsoft and allowed users to freely distribute its open-source code. Red Hat will continue to be led by Jim Whitehurst and Red Hat's current management team.

The biggest acquisition was the $67 billion merger between Dell and EMC in 2016 and JDS Uniphase's $41 billion acquisition of optical-component firm SDL in 2000.

Microsoft completed its $7.5 billion acquisition of open source software company GitHub just two days ago.

On Sunday, Raleigh-based Red Hat, which is celebrating its 25th anniversary this year, will remain a "distinct unit" within IBM, CEO Jim Whitehurst told employees. 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. Imagine Red Hat reaching all corners of the world, with even deeper customer and partner relationships than we have today.

"Importantly, Red Hat is still Red Hat". Since the day we chose to bring open source to the enterprise, our mission has remained unchanged. It is expected to close in the latter half of 2019.

Moreover, it's not inconceivable other companies could step in with higher bids that Red Hat shareholders might demand to be taken seriously.

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