IBM closes deal of $34 billion to buy Red Hat to boost cloud business

IBM closes deal of $34 billion to buy Red Hat to boost cloud business: On Tuesday, IBM (International Business Machines) Corp said it has sealed its $34 billion world’s second-largest technology deal ever by acquisition of software company Red Hat Inc. IBM has now set up the iconic U.S. company on a path in order to try to contest with top software purveyors in the cloud.

  • IBM closed its $34 billion acquisition of Red Hat, the companies announced Tuesday.
  • The acquisition of Red Hat, an open-source, enterprise software maker, marks the close of IBM’s largest deal ever.
  • The move was originally announced in October, when the companies said IBM would buy all shares in Red Hat at $190 each in cash.

The company on Tuesday said in a statement, IBM paid $190 a share for Red Hat in cash, for a total equity value of around $34 billion.

The 108 year old International Business Machines Corp., formerly identified with mainframe computing and has been struggling to take on cloud-related technologies. It’s now playing catch-up to market leaders such as Inc. and Microsoft Corp. in providing computing as well as other software and services over the internet.

Highlighting the initiative into high-margin businesses, IBM in October decided to acquisition Red Hat, the company’s largest gaining in its more than 100 year of history. Ginni Rometty, who is the IBM chief executive since the year 2012, has handled and directed the company in the direction of faster-growing sections like cloud, software and services as well as away from traditional hardware produces, but not without a rough journey.

Rometty, in an interview said that the deal was driven by what its consumers needed and desired as well as helping companies “move mission-critical work” to the cloud, proposing a range of hybrid public as well as private clouds. She said, “We have all the critical parts.”

“This is about hybrid cloud — it is the future, it is the destination of the cloud,” Rometty said in an interview. “This market is a trillion dollars, it’s emerging and it’s very interesting to me that since our announcement now you hear everybody else talking about it too.”

IBM has reported decrease in revenue for past six out of seven years and its new hybrid cloud strategy may possibly help increase in growth, as per to the Bloomberg Intelligence analyst Anurag Rana.

Rana said, “What stood out to us was that IBM would be working closely to its main rivals, Amazon, Microsoft, Google and Alibaba”.

He further added, “This shows a mature way of thinking about the competitive landscape, and if IBM remains true to this philosophy, it should show an improvement in growth down the road.”

With the help of the Red Hat, IBM is going to offer clients the chance to combine their private as well as public clouds, irrespective of which provider they use. “Today people have five to 15 different public clouds and move data between them,” Rometty said.

IBM is also going to offer the first hybrid multi-cloud platform, offering the glue to join several clouds together. “The platform we are talking about has to run on other people’s clouds too. You’ll hear others say hybrid cloud and then only connect their public to their private clouds. Well that’s not that helpful for a client. It has to be multi-cloud,” Rometty further added.