As $34-B deal closes, IBM vows to preserve Red Hat’s autonomy

Tech behemoth IBM announced on July 9 (July 10 in Manila) that it has closed all transactions for the acquisition of open-source firm Red Hat for approximately $34 billion — the biggest in its history.

In a statement, IBM said the acquisition is expected to redefine the cloud market for business with Red Hat’s open hybrid cloud technologies now paired with IBM’s industry might and presence in more than 175 countries.

The combined firms said they will offer a next-generation hybrid multicloud platform based on open source technologies, such as Linux and Kubernetes, to allow businesses to deploy applications on-premises and on private and multiple public clouds.

“Businesses are starting the next chapter of their digital reinventions, modernizing infrastructure and moving mission-critical workloads across private clouds and multiple clouds from multiple vendors,” said IBM chief executive Ginni Rometty.

“They need open, flexible technology to manage these hybrid multicloud environments. And they need partners they can trust to manage and secure these systems. IBM and Red Hat are uniquely suited to meet these needs. As the leading hybrid cloud provider, we will help clients forge the technology foundations of their business for decades to come.”

Red Hat will continue to be led by its CEO Jim Whitehurst and its current management team. Whitehurst is also joining IBM’s senior management team, reporting to Ginni Rometty. IBM said it will maintain Red Hat’s headquarters in Raleigh, North Carolina, its facilities, brands and practices.

Red Hat will operate as a distinct unit within IBM and will be reported as part of IBM’s cloud and cognitive software segment.

IBM’s cloud revenue for the 12-month period through the first quarter of this year grew to over $19 billion. The Red Hat acquisition is expected to contribute approximately two points of compound annual revenue growth to IBM over a five-year period.

IBM said digital reinvention is at an inflection point as businesses enter the next chapter of their cloud journey. To succeed in the next chapter of the cloud, businesses need to manage their entire IT infrastructure, on and off-premises and across different clouds – private and public – in a way that is simple, consistent and integrated, it added.

“Businesses are seeking one common environment they can build once and deploy in any one of the appropriate footprints to be faster and more agile. The acquisition of Red Hat further strengthens IBM as the leader in hybrid cloud for the enterprise,” the company said.

With Red Hat, IBM has acquired one of the most important software companies in the IT industry. Red Hat’s pioneering business model helped bring open source – including technologies like Linux, Kubernetes, Ansible, Java, Ceph and many more – into the mainstream for enterprises. Linux is currently the most used platform for development.

Red Hat Enterprise Linux alone is expected to contribute to more than $10 trillion worth of global business revenues in 2019. By 2023, an additional 640,000 people are expected to work in Red Hat-related jobs.

IBM stressed that it will accelerate open source and hybrid cloud for businesses across industries, as well as preserving the independence and neutrality of Red Hat’s open source heritage.

“This includes its open source community leadership, contributions and development model; product portfolio, services, and go-to-market strategy; robust developer and partner ecosystems, and unique culture,” it said.

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