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IBM buys Red Hat for $34 billion

29 October, 2018, 18:29 | Author: Shawna Walton
  • IBM to acquire Red Hat for $34 billion.                  Gabriel Bouys  AFP  Getty Images

"IBM will become the world's".

Bob Venero, CEO of Holbrook, N.Y. -based solution provider Future Tech, a Red Hat partner and No.115 on the CRN Solution Provider 500, said IBM is going to have to show its channel mettle to make the Red Hat deal work for partners.

BIG BLUE IBM is to acquire, er, Red Hat in an all-cash deal valuing the open source software and services company at $34bn (£26.5bn).

IBM CEO Ginni Rometty dissed the public cloud and noted that most companies are 20 percent along the cloud journey and "renting compute power to cut costs".

IBM is hoping the deal will help it catch up with Amazon.com Inc, Alphabet Inc and Microsoft in the rapidly growing cloud business.

In what has been called the most significant tech acquisition of 2018, IBM revealed today it will buy Linux distributor Red Hat in a deal valued at approximately $34 billion that the information multinational hopes will see it become the world's top hybrid cloud provider. Red Hat meanwhile reported its earnings back in September which were also disappointing and its share price has dropped 19% since then.

Red Hat CEO Jim Whitehurst claimed that the acquisition by IBM would provide the organisation with even more resources to drive Linux into the cloud. Shares traded upwards of $US175 in June, but disappointing earnings combined with a volatile market had seen the price drop sharply.

"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.

IBM, which has a market valuation of $114-billion, has seen revenue decline by nearly a quarter since Rometty took the CEO role in 2012.

$34 billion is several times more than IBM has previously spent on an acquisition, which indicates just how important it thinks this is to its future prosperity. "IBM intends to maintain Red Hat's headquarters, facilities, brands and practices", the company said in a statement. "This gives them an asset that looks forward and not backwards".

The company was founded by Bob Young, the Canadian entrepreneur who also owns the Hamilton Tiger-Cats.

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.

IBM said that both companies will continue to build partnerships with multiple cloud providers, including AWS, Microsoft's Azure, Google Cloud, Alibaba, and others, in addition to IBM Cloud.

Rometty said the acquisition brings together the "best-in-class" hybrid cloud providers, enabling companies to securely move all business applications to the cloud in the process.

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