IBM buys software company Red Hat for US$34b

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

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

"It changes everything about the cloud market", Ginni Rometty, IBM chairman, president and chief executive officer said in a statement.

IBM agreed to acquire software maker Red Hat Inc.in a $33.4 billion bet on jump-starting its efforts to catch up in the cloud.

And yes, both companies are aware of the impact this will have on Linux and open source at large.

Indeed, the move reflects IBM's difficulty in keeping pace in the era of cloud computing.

Though not exactly the oldest, Red Hat is indeed one of the pioneers in the Linux and open source world. "In addition, IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network", says International Business Machines. Between them, IBM and Red Hat have contributed more to the open source community than any other organisation.

IBM paid $34 billion for Red Hat and a chance to be a cloud player-private, public and hybrid-with an ultimate goal of managing multiple clouds in the enterprise.

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Rometty noted that most companies are still only about 20 percent along their way to the cloud. It has more or less survived lately on the server business but the rise of the cloud and cloud providers has seen its name overshadowed and nearly forgotten. "Imagine Red Hat with greater resources to grow into the opportunity ahead of us", Whitehurst told employees in an email Sunday afternoon.

According to Rometty, such innovations have become "core technologies" within the tech giant's US$19 billion hybrid cloud business.

The purchase is created to bolster IBM's floundering cloud business. Red Hat made bets to compensate for this, most prominently with OpenShift and a container platform. While it might be all good on the business side of things, such acquisitions do make open source advocates worry, especially users of the Fedora Linux distribution that's based on and supported by Red Hat.

Anticipating concerns that the acquisition would endanger Red Hat's appeal as an agnostic provider of open-source software, IBM said it will "remain committed to Red Hat's open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem".

Red Hat CEO Jim Whitehurst: Why do the deal with IBM? At the same time, Red Hat will benefit from IBM's hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally. "It remains to be seen if IBM can play the same role, which would be significant upside for IBM".

The deal is a "real winner" for the two companies, who are longtime strategic partners, says Charles King, principal analyst at Pund-IT. The deal, which is also subject to regulatory review, is expected to close in the second half of 2019.

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