IBM to acquire open source tech giant Red Hat for $34 B

IBM plans to acquire open source champion Red Hat for $34 billion at $190 per share in an all-cash deal. The deal has been put up for approval by the board and shareholders of Red Hat.

Over the last two decades, Red Hat has championed the open source movement. Companies like Facebook and Amazon have dabbled with Red Hat's open source knowledge before they went on to become a multi-million-dollar business. Red Hat, on the other hand, could not monetise its own product suite effectively, and annual revenue remained around $3 billion.

With the acquisition of Red Hat, IBM will look to innovate faster for cloud-based architectures with the open source community. IBM's cloud business is worth $19 billion, thanks largely to infrastructure as a service. In a press statement, Ginni Rometty, IBM Chairman, President and Chief Executive Officer said, “The acquisition of Red Hat is a game-changer. It changes everything about the cloud market… 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.”

Red Hat would help IBM build on Linux-based platforms, and the latter could combine its knowledge in containers, Kubernetes, multi-cloud management, and cloud management and automation.

IBM had recently said it continues to build partnerships with multiple cloud providers, including AWS, Microsoft’s Azure, Google Cloud, Alibaba and others to build hybrid solutions. The global public cloud services market is projected to grow 21.4 percent in 2018 to $186.4 billion, up from $153.5 billion in 2017, according to Gartner Inc.

The fastest-growing segment of the market is cloud system infrastructure services (infrastructure as a service or IaaS), which is forecast to grow 35.9 percent in 2018 to reach $40.8 billion. Gartner expects the top 10 providers to account for nearly 70 percent of the IaaS market by 2021, up from 50 percent in 2016.

"The increasing dominance of the hyperscale IaaS providers creates both enormous opportunities and challenges for end users and other market participants," says Sid Nag, research director at Gartner.

“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,” says Jim Whitehurst, President and CEO, Red Hat, in a statement. “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.”