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IBM Buys Linux & Open Source Software Distributor Red Hat For $34 Billion

29 October, 2018, 18:29 | Author: Kristi Dunn
  • Ginni Rometty IBM CEO

IBM says it will acquire North Carolina-based open-source software company Red Hat in a $34 billion stock deal.

According to AFP, the deal remains subject to Red Hat shareholder approval as well as US SEC regulatory approvals.

IBM has hailed the agreement as the most significant tech acquisition of 2018, while CEO Ginni Rometty said the move "changes everything about the cloud market".

"Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs", Rometty said.

With this acquisition, Rometty said IBM will "remain committed" to Red Hat's open governance, open source contributions, participation in the open source community and development model, while also "fostering" its widespread developer ecosystem.

Making money from freely available software has been hard for many companies, however - made obvious by the recently announced merger of open-source-based big-data firms Cloudera Inc. and Hortonworks Inc. "This is the next chapter of the cloud".

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For its part, Red Hat will not have to worry about going bankrupt in the near future.

Bob Venero, CEO of Holbrook, N.Y. -based solution provider Future Tech, a Red Hat partner and No.115 on the CRN Solution Provider 500, said IBM is going to have to show its channel mettle to make the Red Hat deal work for partners.

Still, the premium IBM is paying for the open-source icon indicates it's serious about making a bigger play for the cloud.

In the past years, Red Hat has been able to continuously generate profits by mastering its Linux and open source software distribution strategy. 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. The hope is to address the proprietary issues plaguing today's cloud market that have so far hindered the portability of data across multiple clouds as well as effective multi-cloud security and management.

Red Hat offers a standard version of Linux that runs on commonly available clouds as well as a business's own data centres, and Whitehurst said Red Hat customers were increasingly running its operating system on public clouds.

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. Subscription revenue from that category increased 31 percent to $196 million during Red Hat's second fiscal quarter, compared to an eight-percent increase in revenue from infrastructure software. Sure, open source folks will worry about IBM's purchase, but Big Blue has been a good steward of open source. I'm sure I am not alone is fearing that IBM could ultimately ruin Red Hat and its offerings.

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