IBM to acquire open-source software firm Red Hat for $34B

IBM to acquire open-source software firm Red Hat for $34B

That's a new 52-week high.

"We expect investor skepticism around the deal given IBM's messaging that it is well underway in its transformation", he said.

IBM's Rometty added that most companies are now being held back in their cloud transformation due to closed platforms. Moreover, he said, "IBM immediately bolsters its position in today's multicloud world".

The deal will see IBM acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, more than $70 above the $116.68 at which Red Hat was trading on close of business Friday.

Red Hat will remain a distinct unit in IBM's Hybrid Cloud unit and provide Big Blue with growth, software revenue and a way to grow the cloud business.

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. "The acquisition of Red Hat is a game-changer", Ginni Rometty, IBM's chairman and chief executive, said in a statement. "IBM intends to maintain Red Hat's headquarters, facilities, brands and practices", the company said in a statement.

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

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For its part, Red Hat will not have to worry about going bankrupt in the near future. Joining forces with IBM offers all of that, years ahead of when we could have achieved it alone.

According to Rometty, such innovations have become "core technologies" within the tech giant's US$19 billion hybrid cloud business.

But it's hard to argue the IBM-Red Hat logic. IBM operates one of its largest corporate campuses in Research Triangle Park and employs several thousand people across the state. Red Hat gives IBM software heft and an OpenStack playbook that can rival VMware, which incidentally has become quite cozy with AWS.

"Importantly, Red Hat is still Red Hat". Jim Whitehurst also will join IBM's senior management team and report to Ginni Rometty.

In addition, the combined entity 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.

"IBM has always been a proprietary software and services company, and this is an open-source play", said Venero, who praised Red Hat for its strong channel partnership in enterprise accounts. And yes, enterprises will go from Red Hat-a proverbial Switzerland of software and the cloud-to an IBM-Red Hat combination and one throat to choke. Red Hat has been seen as the gold standard for providing services and support for open-source in a financially sustainable way. While some of that has been from divestitures, most is from declining sales in existing hardware, software and services offerings, as the 107-year-old company has struggled to compete with younger technology companies.

And the complication? The deal is being pitched as making IBM and Red Hat the premier hybrid cloud company.

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