ibusinesslines.com November 14, 2018

IBM to acquire software company Red Hat for $34 billion

29 October 2018, 11:18 | Kelvin Horton

Report: IBM close to acquiring Raleigh-based Red Hat

IBM to Acquire Red Hat for $34 Billion

Red Hat CEO Jim Whitehurst said IBM will give it scale while preserving an open source commitment.

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".

Red Hat's flagship product, Red Hat Enterprise Linux, was the operating system of choice for private data center operators over the last decade or so, firmly establishing Linux as a viable alternative to Microsoft Windows Server and commercial Unix operating systems among those operating their own data centers. "It changes everything about the cloud market", said Ginni Rometty, IBM's chairman and chief executive officer, in the statement.

IBM said Sunday it has reached a deal to buy open source software company Red Hat for $34 billion, among the biggest tech mergers in history which the computing giant said would enhance its cloud offerings.

IBM (NYSE:IBM) and Red Hat (NYSE:RHT) jointly announced today that IBM would be acquiring Red Hat in a deal valuing the company at $190 per share, representing a staggering nearly 63% premium on Red Hat's closing price Friday. The two companies said the deal is subject to Red Hat shareholder and regulatory approval and should be completed in the latter half of 2019.

"IBM is committed to being an authentic multi-cloud provider, and we will prioritise the use of Red Hat technology across multiple clouds", said Arvind Krishna, senior vice president of hybrid cloud at IBM.

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. And yes, enterprises will go from Red Hat-a proverbial Switzerland of software and the cloud-to an IBM-Red Hat combination and one throat to choke. This is the next chapter of the cloud. "This includes our joint Hybrid Cloud collaboration announcement in May, a key precursor in our journey to this day". Red Hat will still be helmed by Jim Whitehurst and Red Hat's current management team.

Red Hat now has more than 95 offices worldwide, including major software-engineering groups in San Francisco and Boston and a public-policy operation in Tyson's Corner, Va., near the nation's capital. 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.

Red Hat is based in Raleigh. "When the transaction closes, we will be a distinct unit within IBM and I will report directly to Ginni [Rometty]".

IBM said it would continue "Red Hat's open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystems".

The purchase illustrates how older technology companies are turning to dealmaking to gain scale and fend off competition.

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