IBM to Acquire Red Hat in Huge Tech Deal


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. Cloud computing giants such as Amazon Web Services Inc. and Microsoft have stolen a march on traditional makers of hardware and software such as IBM and Hewlett Packard Enterprise providing computing, storage, networking and applications - often from open source - as an online service.

"IBM is committed to being an authentic multicloud provider, and we will prioritize the use of Red Hat technology across multiple clouds", said Arvind Krishna, senior vice president for IBM Hybrid Cloud in a statement. "In addition, IBM and Red Hat 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", says International Business Machines.

"Our unwavering commitment to open source innovation remains unchanged", Whitehurst said in the email text released by the company. While things are all status quo for now, big companies do have the tendency to pull the rug from under such projects which, compared to other open source software, often need more resources to serve a large user base. 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 scored dead last in Gartner's recently published its Magic Quadrant for Cloud Infrastructure as a Service (IaaS) Worldwide 2018, being presented as a poorly executing niche player. Both Red Hat and IBM both participate in the enterprise and private cloud market together, already.

IBM said Red Hat would continue to be led by Red Hat CEO Jim Whitehurst and Red Hat's current management team.

IBM says it intends to keep Red Hat's headquarters in Raleigh. Red Hat's stock is down 28 percent over the past six months through Friday, according to data compiled by Bloomberg.

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Upon closing of the acquisition, Red Hat will join IBM's Hybrid Cloud team as a distinct unit, with the aim of maintaining the "independence and neutrality" of Red Hat's open source development heritage.

Headquartered in Raleigh, North Carolina, Red Hat charges fees to its corporate customers for custom features, maintenance and technical support, offering IBM a lucrative source of subscription revenue.

Now you know the appeal of Red Hat.

The two brands also re-affirmed that the open-source nature of Red Hat will be maintained, and codes will still be contributed to the community.

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.

Big Blue announced the deal here, in the past hour, and Red Hat's take is here.