IBM Closes Landmark Acquisition of Software Company Red Hat for $34 Billion

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  • Red Hat will operate as a distinct unit within IBM and will be reported as part of IBM’s Cloud and Cognitive Software segment.
  • Jim Whitehurst will continue to lead Red Hat and its current management team. 
  • The Red Hat acquisition is expected to contribute approximately two points of compound annual revenue growth to IBM over a five-year period.
Source: Red Hat

IBM and Red Hat on Tuesday announced that they have closed the most significant tech acquisition of 2019.

U.S. based tech giant IBM has acquired all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, representing a total equity value of approximately $34 billion.

The landmark acquisition positions IBM as the leading Hybrid Cloud provider and extend Red Hat’s open source innovation to a broader range of clients.

“Together, IBM and Red Hat will accelerate innovation by offering a next-generation hybrid multicloud platform. Based on open source technologies, such as Linux and Kubernetes, the platform will allow businesses to securely deploy, run and manage data and applications on-premises and on private and multiple public clouds,” the companies stated in a press release.

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The acquisition redefines the cloud market for business. Red Hat’s open hybrid cloud technologies are now paired with the unmatched scale and depth of IBM’s innovation and industry expertise and sales leadership in more than 175 countries.

“As the leading hybrid cloud provider, we will help clients forge the technology foundations of their business for decades to come,” said Ginni Rometty, IBM chairman, president and CEO.

“THE ACQUISITION OF RED HAT FURTHER STRENGTHENS IBM AS THE LEADER IN HYBRID CLOUD FOR THE ENTERPRISE”

IBM preserves Red Hat’s independence and neutrality

Red Hat will operate as a distinct unit within IBM and will be reported as part of IBM’s Cloud and Cognitive Software segment.

Jim Whitehurst will continue to lead Red Hat and its current management team. She is joining IBM’s senior management team, reporting to Ginni Rometty.

IBM will maintain Red Hat’s headquarters in Raleigh, North Carolina, its facilities, brands and practices.

“Joining forces with IBM gives Red Hat the opportunity to bring more open source innovation to an even broader range of organizations and will enable us to scale to meet the need for hybrid cloud solutions that deliver true choice and agility,” said Jim Whitehurst, president and CEO, Red Hat.

“RED HAT’S MISSION AND UNWAVERING COMMITMENT TO OPEN SOURCE WILL REMAIN UNCHANGED AND WILL CONTINUE TO OFFER THE CHOICE AND FLEXIBILITY INHERENT TO OPEN SOURCE AND HYBRID IT ENVIRONMENTS”

Red Hat acquisition to boost IBM’s revenue growth

IBM’s cloud revenue has grown from four percent of total revenue in 2013 to 25 percent today. IBM 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.

Red Hat’s fiscal year 2019 revenue was $3.4 billion, up 15 percent year-over-year. Fiscal first quarter 2020 revenue, reported in June, was $934 million, up 15 percent year-over-year.

“Over the next five years, IDC expects enterprises to invest heavily in their journeys to the cloud, and innovation on it. A large and increasing portion of this investment will be on open hybrid and multicloud environments that enable them to move apps, data and workloads across different environments,” said Frank Gens, Senior Vice President and Chief Analyst, IDC.

“With the acquisition of Red Hat, and IBM’s commitment to Red Hat’s independence, IBM is well positioned to help enterprises differentiate themselves in their industry by capitalizing on open source in this emerging hybrid and multicloud world,” he added.

 

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