IBM set to acquire North Carolina-based Red Hat in $34B deal

The two companies said IBM intends to keep Red Hat's headquarters in Raleigh, where it has more than 2,000 employees in a downtown office building, as well as maintain Red Hat's "facilities, brands and practices".

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

The technology and consulting company announced Sunday it would buy all Red Hat shares at $190 apiece - 63 percent above Red Hat's closing price Friday. Presumably the acquisition will have to jump various regulatory hurdles before it is set in stone.

Ginni Rometty, IBM chairman and chief executive described IBM's largest ever acquisition as a "game-changer". Both Red Hat and IBM both participate in the enterprise and private cloud market together, already. "IBM will become the world's number one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses".

Red Hat will remain a distinct unit in IBM's Hybrid Cloud unit and provide Big Blue with growth, software revenue and a way to grow the cloud business. Imagine us helping even more customers benefit from the choice and flexibility afforded by hybrid and multi-cloud. This is the next chapter of the cloud.

Anticipating concerns that the acquisition would endanger Red Hat's appeal as an agnostic provider of open-source software, IBM said it will "remain committed to Red Hat's open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem".

Red Hat is based in Raleigh. In particular, they said they are committed to open-source efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network. You aren't about to see Red Hat's operating system vanish. "It requires shifting business applications to hybrid cloud, extracting more data and optimising every part of the business, from supply chains to sales".

"Today's announcement is the evolution of our long-standing partnership", Rometty said. Whitehurst also will join IBM's senior management team and report to Rometty. With that said, IBM has always been an open source proponent, so maybe it will work out well. However, companies that are deploying workloads on public cloud providers tend to prefer Ubuntu Linux for that work, and that coupled with acceleration toward the cloud in general has stalled revenue growth in that category.

It's not immediately obvious to me how the marriage between IBM and Red Hat brings combined value to the market. "This includes our joint Hybrid Cloud collaboration announcement in May, a key precursor in our journey to this day".

  • Anthony Vega