On Sunday, IBM and Red Hat announced that IBM is going to acquire Red Hat at around $34 billion. If you don’t know Red Hat, it is a major distributor of open-source software and technology.
As mentioned by both the companies, IBM will buy all shares in Red Hat at $190 each in cash. Before the deal was finalized, Red Hat’s shares’ closing price was $116.68 on Friday.
Now, Red Hat will become a part of IBM’s Hybrid Cloud division. Also, its CEO Jim Whitehurst will be seen in IBM’s senior management.
IBM’s biggest deal and the third largest deal in the history of U.S. tech
IBM never had such a huge deal before. It is by far IBM’s biggest deal ever. Also, in the history of U.S. tech, this acquisition is the third largest deal. In 2016, there was a $67 billion merger deal between EMC and Dell. In 2000, JDS Uniphase acquired SDL, an optical-component supplier, for $41 billion.
Journey of Red Hat begun 25 years ago as a distributor of a specific Linux flavor. Currently, Red Hat is well-known as a distributor and supporter of Red Hat Enterprise Linux. It also supplies other technologies that are commonly used in data centers.
IBM’s CEO Rometty made it clear that the deal does not suggest any of her plans about leaving her position in the company. She is definitely not going anywhere.
This year, Open Source has been the biggest topic in technology. Other two biggest tech deals of the year are Microsoft’s $7.5 billion acquisition of GitHub, and Salesforce’s $6.5 billion acquisition of MuleSoft. Recently, two big-data rivals, Hortonworks and Cloudera merged together in a deal of $5.2 billion.
According to CEOs of IBM and Red Hat, Microsoft’s acquisition of GitHub has nothing to do with their deal. They weren’t looking for any deals.
IBM wants to grow in the cloud infrastructure business
In the most recent earning report of IBM, it had a lower-than-expected revenue. Also, its revenues are decreasing since the previous year after three quarters of growth. Before the growth of three quarters, the company’s revenue dropped continuously for about five years.
The company wants to compete Amazon and Microsoft in the cloud infrastructure business. It is one of the biggest four key strategies of the company. The others are – mobile, social, and analytics. Recently, IBM announced to have some cloud deals with ExxonMobil, Economical Insurance, and Novis.
According to IBM and Red Hat, the deal would help businesses to work more in the cloud, by keeping their data and apps portable and more secure. Businesses could adapt any cloud or hybrid technology, and it would not affect their work and privacy.