Monday, 29 October 2018 05:28

IBM to acquire Red Hat for US$34 billion Featured

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Tech services and hardware vendor IBM has acquired open source company Red Hat for a sum of about US$34 billion, the two companies announced on Sunday, US time.

The announcement said IBM would acquire all of the issued and outstanding common shares of Red Hat for US$190 per share in cash.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM chairman, president and chief executive.

“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.

“Most companies today are only 20% along their cloud journey, renting compute power to cut costs,” she said.

“The next 80% percent is about unlocking real business value and driving growth. 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.”

“Open source is the default choice for modern IT solutions, and I’m incredibly proud of the role Red Hat has played in making that a reality in the enterprise,” said Jim Whitehurst, president and chief executive of Red Hat.

“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 has been in business since 1993 and has expanded its offerings from Linux to a number of open source middleware products.

In its early days, the company enjoyed the advantage of being used extensively by the US military as the Department of Defence has certified its Red Hat Enterprise Linux product for use.

This provided the company with a large, stable customer during the early days of its expansion and 10 years ago the US Army had the largest installed base of Red Hat Linux.

The NSA uses Red Hat Linux for the most part to run its XKEYSCORE program – an application that The Intercept, the website run by journalist Glenn Greenwald, describes as NSA's Google for private communications.

Commenting on the acquisition, Dave Bartoletti, vice-president and principal analyst at the technology analyst firm Forrester, said: "IBM embraced Linux and open source software earlier than many tech titans of the last era. Red Hat has built the most successful company ever focused solely on Linux and open source middleware.

"While IBM has struggled to keep up with Amazon Web Services, Microsoft, and Google in the public cloud market, this deal gives IBM a new stronghold in the cloud development platforms market.

"In Forrester’s recent public cloud development-only platforms Wave and our Enterprise Container platforms New Wave, both IBM and Red Hat performed very well. The combined company has a leading Kubernetes and container-based cloud-native development platform, and a much broader open source middleware and developer tools portfolio than either company separately.

"While any acquisition of this size will take time to play out, the combined company will be sure to reshape the open source and cloud platforms market for years to come."

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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