IBM walks in the cloud with $34 billion Red Hat acquisition

IBM on Monday announced the acquisition of Red Hat, the world’s leading provider of open source cloud software, at an enterprise value of approximately $34 billion.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer in a statement. “IBM will become the world’s #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”

The transaction is IBM’s biggest acquisition.

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Founded in 1993, Red Hat specializes in Linux operating systems, the most popular type of open-source software.

“Most companies today are only 20% along their cloud journey, renting compute power to cut costs,” she said. “The next 80% is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.”

IBM was founded in 1911 and is known in the technology industry as Big Blue, a reference to its once blue computers. It is making a transition from legacy computers, subscription-based software services and mainframe servers to new technology products and services. It recently forayed into artificial intelligence.

“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 CEO, Red Hat. “Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience –  all while preserving our unique culture and unwavering commitment to open source innovation.”

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IBM has been investing to lead in the emerging, high value segments of the IT industry. Red Hat represents the latest and largest move as part of that high value strategy. They bring to IBM the world’s largest portfolio of open source technology, their innovative hybrid cloud platform, and a vast open source developer community. Together, we become the world’s leading hybrid multi-cloud provider. This is a game-changer for the cloud industry.

IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud. At the same time, Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally.

Upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture.

Red Hat will continue to be led by Jim Whitehurst and Red Hat’s current management team. Jim Whitehurst also will join IBM’s senior management team and report to Ginni Rometty. IBM intends to maintain Red Hat’s headquarters, facilities, brands and practices.

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