IBM to acquire Red Hat for US$34 billion

IBM is reportedly nearing a deal to acquire Red Hat, the software company valued at $20 billion

This provided the company with a large, stable customer during the early days of its expansion and 10 years ago the US Army had the largest installed base of Red Hat Linux.

Indeed, the move reflects IBM's difficulty in keeping pace in the era of cloud computing. The company once synonymous with mainframe computing has been slow to adopt cloud-related technologies and has had to play catch-up to market leaders Amazon.com Inc. and Microsoft Corp.in offering computing and other software and services over the internet. It will just have to worry about potentially being dissolved into IBM's businesses or its open source culture and principles being diluted in the process.

"Together we can become *the* leading hybrid cloud solutions provider". This is the next chapter of the cloud.

The Raleigh, North Carolina based company is today present in 35 countries and employs some 12,000 people, and is one of the best-known open-source players whose customers pay for tailor-made solutions.

Venero said he is hopeful IBM will continue the strong channel relationships that Red Hat has built with partners rather than taking deals direct.

IBM has announced it will buy Red Hat, the world's biggest Linux company, for US$34-billion.

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IBM and Red Hat announced Sunday that IBM will acquire Red Hat in a deal worth $34 billion. Red Hat made bets to compensate for this, most prominently with OpenShift and a container platform. This will likely not impact IBM's stature in the public cloud where the companies have a presence, but not almost as much as the private cloud.

IBM will suspend its share repurchase program in 2020 and 2021 to maintain an appropriate leverage ratio on the books but it's fair to say that this is probably the most audacious move the company has undertaken in a long time.

"Today is a banner day for open source", said Paul Cormier, Red Hat's vice president and president of products and technologies.

IBM said that it will maintain Red Hat partnerships with major public cloud providers, such as Amazon Web Services and Microsoft Azure, which suggests that it has acknowledged that its own public cloud efforts have stalled. The two companies will remain committed to "the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network" open-source licenses and initiatives, according to the companies' joint statement. The two are "committed" to open source, including contributions to the community. It took its name after a merger with another company, Red Hat Linux.

"Red Hat was previously able to position itself as the Switzerland for on-premises computing", Mueller said.

Terms of the deal - unveiled following a weekend of media speculation - will see Big Blue acquire all of the issued and outstanding common shares of Red Hat for US$190.00 per share in cash, in an agreement expected to be finalised in the second half of 2019. It's probably both a tacit admission that the company can grow faster with younger, nimbler innovators than without them so it seems like there is business sense to the deal.

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