In Major Acquisition, IBM Will Acquire Open-Source Software Company Red Hat

IBM to acquire Red Hat for $34 billion.                  Gabriel Bouys  AFP  Getty Images

In the past years, Red Hat has been able to continuously generate profits by mastering its Linux and open source software distribution strategy.

IBM will pay $190 per Red Hat share in cash. Presumably the acquisition will have to jump various regulatory hurdles before it is set in stone. "It changes everything about the cloud market", said Ginni Rometty, IBM's chairman, president and CEO.

USA tech giant IBM has agreed to a deal with Red Hat, an open source cloud software provider, to purchase it for $34 billion, making the 107-year-old United States firm the world's biggest hybrid cloud provider.

Sending a strong signal towards dominating the emerging $1 trillion Hybrid Cloud market, tech major IBM has announced to acquire Open Source Solutions leader Red Hat for a massive $34 billion. "The next 80% is about unlocking real business value and driving growth".

Cloud computing refers to the delivery of computing services, including storage and software, over the internet to achieve economies of scale. Imagine Red Hat reaching all corners of the world, with even deeper customer and partner relationships than we have today. It earned its distinction for being one of the first companies to make a living from open source software the way it was meant to be, by offering services in relation to operating and maintaining Linux systems, especially on the business side.

If you can't be a big public cloud provider why not simply manage them?

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"Our unwavering commitment to open source innovation remains unchanged. Together we can become *the* leading hybrid cloud solutions provider".

The Red Hat purchase is the latest in a series of big-money acquisitions by IBM over the past 10 or so years. "It requires shifting business applications to hybrid cloud, extracting more data and optimising every part of the business, from supply chains to sales". The deal is described in the companies' press release as an evolution of the long-standing partnership.

"The path for hybrid cloud just got easier", Paul Cormier, president of Red Hat Products and Technology, tells Barron's. "This includes our joint Hybrid Cloud collaboration announcement in May, a key precursor in our journey to this day".

The Red Hat deal is IBM's biggest acquisition yet for a reason: The stakes are too high and IBM has already been bumped out of the big cloud conversation by Amazon Web Services, Google Cloud Platform and Microsoft Azure. Whitehurst also will join IBM's senior management team and report to Rometty.

Founded in 1993, Red Hat launched its famous version of Linux OS a year later, becoming a pioneering proponent of the open source movement that arose to counter giants like Microsoft whose models were based on keeping their source code secret. This puts the enterprise linux distributor at a valuation of approximately $34 billion dollars making it one of the largest technology acquisitions in history.

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