Monday, October 29th 2018

IBM To Acquire Red Hat, Completely Changing The Cloud Landscape

IBM and Red Hat, the world's leading provider of open source cloud software, announced today that the companies have reached a definitive agreement under which IBM will acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, representing a total enterprise value of approximately $34 billion.

"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," said Ginni Rometty, IBM Chairman, President and Chief Executive Officer. "IBM will become the world's #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.
"Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs," she said. "The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales."

"Open source is the default choice for modern IT solutions, and I'm incredibly proud of the role Red Hat has played in making that a reality in the enterprise," said Jim Whitehurst, President and CEO, Red Hat. "Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience - all while preserving our unique culture and unwavering commitment to open source innovation."

This acquisition brings together the best-in-class hybrid cloud providers and will enable companies to securely move all business applications to the cloud. Companies today are already using multiple clouds. However, research shows that 80 percent of business workloads have yet to move to the cloud, held back by the proprietary nature of today's cloud market. This prevents portability of data and applications across multiple clouds, data security in a multi-cloud environment and consistent cloud management.

IBM and Red Hat will be strongly positioned to address this issue and accelerate hybrid multi-cloud adoption. Together, they will help clients create cloud-native business applications faster, drive greater portability and security of data and applications across multiple public and private clouds, all with consistent cloud management. In doing so, they will draw on their shared leadership in key technologies, such as Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation.

IBM's and Red Hat's partnership has spanned 20 years, with IBM serving as an early supporter of Linux, collaborating with Red Hat to help develop and grow enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers. These innovations have become core technologies within IBM's $19 billion hybrid cloud business. Between them, IBM and Red Hat have contributed more to the open source community than any other organization.

"Today's announcement is the evolution of our long-standing partnership," said Rometty. "This includes our joint Hybrid Cloud collaboration announcement in May, a key precursor in our journey to this day."

With this acquisition, IBM 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. 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.

IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud. 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.

"IBM is committed to being an authentic multi-cloud provider, and we will prioritize the use of Red Hat technology across multiple clouds" said Arvind Krishna, Senior Vice President, IBM Hybrid Cloud. "In doing so, IBM will support open source technology wherever it runs, allowing it to scale significantly within commercial settings around the world."

Upon closing of the acquisition, Red Hat will join IBM's Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat's open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture. Red Hat will continue to be led by Jim Whitehurst and Red Hat's current management team. Jim Whitehurst also will join IBM's senior management team and report to Ginni Rometty. IBM intends to maintain Red Hat's headquarters, facilities, brands and practices.

"IBM's commitment to keeping the things that have made Red Hat successful - always thinking about the customer and the open source community first - make this a tremendous opportunity for not only Red Hat but also open source more broadly," said Paul Cormier, President, Products and Technologies, Red Hat. "Since the day we decided to bring open source to the enterprise, our mission has remained unchanged. And now, one of the biggest enterprise technology companies on the planet has agreed to partner with us to scale and accelerate our efforts, bringing open source innovation to an even greater swath of the enterprise."

Financial Details
The acquisition of Red Hat reinforces IBM's high-value model. It will accelerate IBM's revenue growth, gross margin and free cash flow within 12 months of closing. It also will support a solid and growing dividend.

The company will continue with a disciplined financial policy and is committed to maintaining strong investment grade credit ratings. The company will target a leverage profile consistent with a mid to high single A credit rating. The company intends to suspend its share repurchase program in 2020 and 2021.

At signing, the company has ample cash, credit and bridge lines to secure the transaction financing. The company intends to close the transaction through a combination of cash and debt.

The acquisition has been approved by the boards of directors of both IBM and Red Hat. It is subject to Red Hat shareholder approval. It also is subject to regulatory approvals and other customary closing conditions. It is expected to close in the latter half of 2019.
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21 Comments on IBM To Acquire Red Hat, Completely Changing The Cloud Landscape

#1
R-T-B
I'm surprised it took so long. I honestly thought this was going to happen back in 200p, when IBM's buzzword/phrase for enterprises using OS/2 and wondering where to go was "migrate to RHEL"
Posted on Reply
#2
FordGT90Concept
"I go fast!1!11!1!"
I can't believe Red Hat is worth so much.
Posted on Reply
#4
DeathtoGnomes
I'm thinking this a move to counter m$'s buying of Github.
Posted on Reply
#5
GoldenX
So now, Fedora is "kinda" the official operating system of the PC.
Posted on Reply
#6
Frick
Fishfaced Nincompoop
"DeathtoGnomes said:
I'm thinking this a move to counter m$'s buying of Github.
Sure. The only way to compare bussiness deals is too look at the numbers. This number is bigger, therefore it trumps the Github aquisition and invalidates it.
Posted on Reply
#7
StrayKAT
Change the whole brand name. Fedoras and computers don't mix well. lol

"GoldenX said:
So now, Fedora is "kinda" the official operating system of the PC.
In a way it already was, since Linus relies on it (or at least, Fedora Linux) and builds the kernel on it. And some of their system level contributions end up becoming defacto standards (PulseAudio and systemd, for example).
Posted on Reply
#8
DeathtoGnomes
"Frick said:
Sure. The only way to compare bussiness deals is too look at the numbers. This number is bigger, therefore it trumps the Github aquisition and invalidates it.
idk, i dont think the numbers matter here, its probably more strategic.
Posted on Reply
#9
bug
"FordGT90Concept said:
I can't believe Red Hat is worth so much.
They had almost $3bn revenue in 2017. Typically companies sell ~10x their revenue.

Now, my issue is when I say Red Hat, I don't thing "cloud", but a myriad of other products that don't have much to do with the cloud and that could get shafted big time in this acquisition. See how Oracle bought Sun for MySQL and what they did to everything in Sun's portfolio not related to MySQL.
Posted on Reply
#10
bonehead123
2 things that should be highlighted here (for those who can read between the lines !) :

A) "extracting more data" TRANSLATION: they will be able to get to MOAR of your personal information, browsing habits, medical records, financial details, social media presence etc etc etc even faster and easier than before .....

B) "It will accelerate IBM's revenue growth, gross margin and free cash flow within 12 months of closing"
TRANSLATION: quickly making way MOAR money for them, their execs and their ability to gobble up/squash/liquidate even more smaller companies that may impact or threaten their business models...

HUmmmm...... 18 paragraphs to say the above, gee whiz, I wish all press releases were like this :)

edit... Oh I forgot, they are like this, so what else is new here ????/
Posted on Reply
#11
TiN
Rip Red Hat..
Posted on Reply
#12
StrayKAT
"TiN said:
Rip Red Hat..
I think it's more sad for IBM actually. They already have a real UNIX, and some of the most powerful servers in the world and their own CPUS... and people still want Linux on x86.
Posted on Reply
#13
rblc
"TiN said:
Rip Red Hat..
Yes, small tragedy for RHEL, CentOS, OpenShift and OpenStack users.
Posted on Reply
#14
lexluthermiester
My 2cents;
Setting aside stock market/investor reaction, I think this can and will be a good move for both companies. IBM will gain the software library is needs and has needed for a long time and RedHat will get the market stability of a proven tech leader. Think they should keep the name RedHat. Hopefully Fedora won't.
Posted on Reply
#15
rvalencia
"StrayKAT said:
I think it's more sad for IBM actually. They already have a real UNIX, and some of the most powerful servers in the world and their own CPUS... and people still want Linux on x86.
IBM Power server solution = single source
IBM AIX = single source
Posted on Reply
#16
R-T-B
"bonehead123 said:
2 things that should be highlighted here (for those who can read between the lines !) :

A) "extracting more data" TRANSLATION: they will be able to get to MOAR of your personal information, browsing habits, medical records, financial details, social media presence etc etc etc even faster and easier than before .....

B) "It will accelerate IBM's revenue growth, gross margin and free cash flow within 12 months of closing"
TRANSLATION: quickly making way MOAR money for them, their execs and their ability to gobble up/squash/liquidate even more smaller companies that may impact or threaten their business models...

HUmmmm...... 18 paragraphs to say the above, gee whiz, I wish all press releases were like this :)

edit... Oh I forgot, they are like this, so what else is new here ????/
That's frankly a tinfoil hat way to read this.

"Big data" need not be privacy invasive. Historically, IBM hasn't really gone that way.

And remember, this is coming from a bigtime privacy advocate here on the forums.

"StrayKAT said:
I think it's more sad for IBM actually. They already have a real UNIX, and some of the most powerful servers in the world and their own CPUS... and people still want Linux on x86.
Linux builds just fine on POWER too. Maybe linux isn't as dead as the storm in a teakettle CoC thingy led everyone but me to believe... heh.

"rblc said:
Yes, small tragedy for RHEL, CentOS, OpenShift and OpenStack users.
I mean, not really. IBM is a bigtime supporter of OSS.
Posted on Reply
#17
StrayKAT
"R-T-B said:


Linux builds just fine on POWER too. Maybe linux isn't as dead as the storm in a teakettle CoC thingy led everyone but me to believe... heh.
.
I think it still was a storm, at least for the base that built it. Not for corporations. This was basically a bunch Linux corporate board members (Intel, Facebook, IBM, AT&T, Oracle, Microsoft funnily) doing a hostile takeover of the kernel. The CoC is a distraction. Linus was the only actual individual and grassroots guy in that group, with defacto leadership.. and people strangely cheered on his diminished capacity like it was a good thing. Because "muh feelings".
Posted on Reply
#18
R-T-B
"StrayKAT said:
I think it still was a storm, at least for the base that built it.
In a teakettle. Linus is already back and releases are still happening.
Posted on Reply
#19
StrayKAT
"R-T-B said:
In a teakettle. Linus is already back and releases are still happening.
Back like a castrated dog from the vet. :P
Posted on Reply
#20
Readlight
Why not, steel the middle class money and then transfer it to blockchain. so then the rich silicon waly people can live.
Posted on Reply
#21
R-T-B
"StrayKAT said:
Back like a castrated dog from the vet. :P
I mean... he is still coding. Also, unetured dogs can be problematic. Try human decency and not pack behavior. OT though.
Posted on Reply
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