IBM announced on Sunday that it will purchase Red Hat, an enterprise software company, for $190 per share in a $34 billion deal that will bring renewed competition to the cloud computing sector.
The deal is expected to close in the latter half of 2019 following approval from Red Hat shareholders and regulatory authorities. IBM CEO Ginni Rometty described the transaction as a “game-changer.”
Red Hat offers open source software to enterprises, and with the addition of its resources to IBM’s cloud services business (already worth $19 billion per year), it is expected to better help businesses with data portability and security.
“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” Rometty said in a statement.
“The next 80 percent 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.”
After the closure of the deal, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, with the pair voicing their commitment to preserving Red Hat’s “neutrality” and open source credentials with Red Hat CEO Jim Whitehurst set to join IBM’s senior management team and reporting directly to Rometty.
Research cited by the pair asserts that 80 percent of business workloads have yet to move to the cloud as many of the offerings already on the market are require proprietary software.
IBM’s and Red Hat’s partnership has spanned 20 years, with IBM serving as an early supporter of Linux, collaborating with Red Hat to help develop and grow enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers.
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.
Arvind Krishna, svp, IBM Hybrid Cloud, added, “IBM is committed to being an authentic multi-cloud provider, and we will prioritize the use of Red Hat technology across multiple clouds. In doing so, IBM will support open source technology wherever it runs, allowing it to scale significantly within commercial settings around the world.”
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