IBM has confirmed its intention to acquire Red Hat for $190 per share in cash, totalling $34bn. Whilst the deal has been approved by the board of directors at both companies, closure is not anticipated until late 2019. This deal poses real significance for IBM as they look to take a leap into hybrid cloud territory.
Despite IBM turning over $79n in 2017 and having been firmly established as both a business and household name, IBM’s product portfolio remains very much on-premises.
IBM and Red Hat have been working together for some time, with Red Hat listed as a cloud partner on their website. Back in May, a press release following the Red Hat Summit, confirmed a major expansion to the long-standing relationship between the two vendors, to enable IBM and Red Hat customers to benefit from the combined power of both companies’ technologies in private and public clouds.
The announcement noted that container technologies are fast becoming a safe and reliable way to move applications across multiple IT footprints, from existing data centres to the public cloud and vice versa. Going hand-in-hand with IBM’s shift to containerised software, Red Hat’s expansive portfolio of enterprise-grade, cloud-native, and hybrid cloud infrastructure solutions, sat perfectly to provide a clear route for enterprises to adopt hybrid cloud computing.
IBM Cloud Private
IBM and Red Hat today partner to bring “IBM Cloud Private” and its portfolio of application services, including IBM Websphere, IBM MQ, and IBM DB2 platforms to the Red Hat Openshift Container Platform.
At the time of the announced partnership, Paul Cormier, President, Products and Technologies, Red Hat, said:
“By extending our long-standing collaboration with IBM, we’re bringing together two leading enterprise application platforms in Red Hat OpenShift Container Platform and IBM Cloud Private and adding the power of IBM’s software and cloud solutions”.
Future of IBM
IBM will very much take the lead on all Red Hat products and solutions moving forward. Recognition of the IBM superbrand coupled with the cloud specialities of Red Hat make this partnership a force to be reckoned with.
The latest acquisiton of Red Hat is the third major acquisition this year. IBM has already finalised deals for Oniqua Holdings Pty Ltd., an MRO Inventory Optimization Software specialist, as well as Armanta, Inc., a business intelligence platform.
The Red Hat deal, in particular, is one that IBM are really excited about with regards to the future. Ginni Rometty, IBM Chairman, President and Chief Executive Officer, commented on the proposed deal:
“IBM will become the world’s number-one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses”.
As a serious competitor to the likes of Amazon and Microsoft in the infrastructure space, immediate return on investment will be crucial for IBM to justify the price tag. IBM said that Red Hat will add to its revenue growth, gross margin and free cash flow within 12 months of deal closure.