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IBM To Acquire Cloud Computing Firm Red Hat For $47 Billion

IBM has announced that it will acquire open-source cloud software company Red Hat for AU$47 billion/US$34 billion. The deal is the largest IBM has undertaken and represents IBM’s plans to expand its Hybrid Cloud division and catch up with Amazon Web Services, Microsoft Azure, and Google Cloud.

IBM will pay $US190 per share for the software company, more than 60% premium to Red Hat’s closing stock price of $US116.68 on Friday last, according to Business Insider. Shares traded upwards of $US175 in June, but lower than expected earnings combined with a volatile market had seen the price drop sharply.

Red Hat is a leading provider of open source software and services for enterprise customers, focusing on cloud computing and Linux servers and was the first open source software company to surpass in US$1 billion in revenue in 2012.

CEO and president of Red Hat, Jim Whitehurst stated in a release that “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”.

Red Hat will join IBM’s Hybrid Cloud team as a distinct unit and will continue to build and partnerships with major cloud providers including Microsoft Azure, Google Cloud, and Amazon Web Services and more.

It will reportedly maintain independence and neutrality of their open source development despite the IBM acquisition. Whitehurst has stated that IBM has ensured the Red Hat will maintain “unwavering commitment to open source innovation.”

Whitehurst will continue to lead Red Hat and Red Hat’s management team and will join IBM’s senior management team reporting to IBM Chairman and CEO Ginni Rometty.

Rometty has said that “IBM will become the world’s #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.” Rometty stated that this deal marks the future for cloud systems and will unlock “real business value and driving growth.”

The acquisition, which has been approved by the boards of both IBM and Red Hat, is expected to close in the latter half of 2019.

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