IBM announced this afternoon that it will acquire open-source software company Red Hat for $34 billion, the largest deal IBM has ever done, according to Reuters. The deal will help IBM expand its reach as an enterprise cloud computing provider.
In a joint press statement Jim Whitehurst, president and CEO of Red Hat, stated
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.
Ginni Rometty, IBM Chairman, President and CEO, stated "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."
In an accompanying Q&A, Arvind Krishna, senior vice president, IBM Hybrid Cloud, states
We are committed to retaining Red Hat’s culture, leadership and practices. It’s important to remember that IBM has long been a champion of the open source community, starting with our $1 billion investment in Linux 20 years ago. With every crank of the technology cycle over the last two decades, the open source community has played a crucial development role, and that has never been more apparent than today, as companies work to shift their business applications to the cloud. Within that open source community, IBM and Red Hat have had a long and successful relationship. Between us, IBM and Red Hat have contributed more to the open source community than any other organization. And we share many common beliefs – starting with the fact that the IT world is, and will continue to be, hybrid.
Red Hat describes itself as a leading provider of open-source software and services for enterprise customers, focusing on cloud computing and Linux servers. In 2012, it became the first open-source software vendor to surpass $1 billion in revenue.
Red Hat's last reported full-year revenue, the 12 months to February 2018, was $2.9 billion, up 21 per cent on a year ago, with profit of $259 million, pretty much flat on the year before.
IBM reported worse than expected revenue in its most recent earnings update. The company has been working to catch up to Amazon, Microsoft and Google in the cloud infrastructure business.
The deal between IBM and Red Hat is expected to close in the second half of 2019. At this point Red Hat will join IBM's Hybrid Cloud team as a distinct unit, with Red Hat's Whitehurst joining IBM's senior management team, reporting to Rometty.
2018 has been a busy year for mergers, but IBM's deal with Red Hat is by far and away the largest tech deal to be announced. It follows Microsoft's $7.5 billion purchase of GitHub and SalesForce's $6.5 billion acquisition of MuleSoft. Earlier this month, big-data rivals Cloudera and Hortonworks agreed to merge in a $5.2 billion deal.
