IBM buys Red Hat in US$34 billion deal

IBM buys Red Hat in US$34 billion deal

IBM said on Sunday (Oct 28) it has reached a deal to buy software company Red Hat for US$34 billion, a move the computing giant said would enhance its cloud offerings, a key area of growth.

According to AFP, the deal remains subject to Red Hat shareholder approval as well as US SEC regulatory approvals. "Red Hat customers that want to remain on-premises are a large upsell market".

Red Hat will join IBM's Hybrid Cloud team as a separate unit, continuing to be led by the current management team.

United States tech giant IBM has agreed to a deal with Red Hat, an open source cloud software provider, to purchase it for $34 billion, making the 107-year-old U.S. firm the world's biggest hybrid cloud provider. And now, one of the biggest enterprise technology companies on the planet has agreed to partner with us to scale and accelerate our efforts, bringing open source innovation to an even greater swath of the enterprise.

At this stage, there have been no announcements as to staffing changes locally or worldwide. You aren't about to see Red Hat's operating system vanish.

In 2015, International Business Machines (IBM) announced that it would move an expansive network of law enforcement data to the cloud for use by law enforcement agencies across North America.

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

Still, the premium IBM is paying for the open-source icon indicates it's serious about making a bigger play for the cloud. Red Hat meanwhile reported its earnings back in September which were also disappointing and its share price has dropped 19% since then.

Red Hat is one of the pioneers to commercialize open-source software, in which code is made freely available for others to redistribute and modify.

It's not immediately obvious to me how the marriage between IBM and Red Hat brings combined value to the market. 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. But it is expected to close by the second half of 2019.

Red Hat itself has been missing analyst targets and also guided below expectations for their next quarter, raising concerns that the company itself was losing out to rivals.

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