IBM on Tuesday, announced their purchase of Cloud computing giant, Red Hat. The news was made public the same day by the two satisfied companies.
The IBM shares turned downwards by 1% on Monday after late in the morning trading to indicate what is now official.
IBM’s latest acquisition of Red Hat, the multinational open-source enterprise software creator is the largest deal in the organization’s history and a top ten deal in the history of United States technology companies. Once you exclude the merger between AOL and Time Warner, the deal is only beaten by Dell’s purchase of EMC in 2015 for $67 billion, Avago’s purchase of Broadcom for 37 billion in the same year and JDS Uniphase’s $41 billion takeover of rival fibre optic maker SDL in 2000.
This deal had been announced in October when both companies declared that record-patent holder IBM would acquire all Red Hat shares for $190 each in cash.
With this deal, Red Hat is now going to become a member of IBM’s hybrid cloud department just as was made public when the October announcement was made. This will cause a change in the operations at IBM with Red Hat CEO James Whitehurst transitioning to become a member of the IBM senior management team submitting reports to the companies 7 year top boss Ginni Rometty (CEO).
IBM made the decision to allow Red Hat maintain her headquarters at Raleigh, state of North Carolina.That is along with the company’s equipment, facilities, brands and practices. The company wishes for Red Hat to still operate as if it were unacquired.
Big Blue’s strategy for their cloud business thus far is simply getting client companies help to attach their many cloud platforms together instead of competing head first with the Supersized providers of cloud like Amazon Web Services, Google and Microsoft.
IBM announced that the new acquisition will continue “to build and expand its partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud and Alibaba.”
From 2013, the company has watched cloud revenue as a percentage of the total revenue go up by a multiple of 6 to 25 percent. For 12 months of the company entering into the 2019 first quarter and cloud revenue has exceeded 25 billion dollars.
IBM said in a statement that ‘Red Hat is expected to contribute approximately two points of compound annual revenue growth over a five-year period’.
IBM had earlier told the public that this move would be the move to allow the company take on more control over the cloud space with more influence. As is very well known, the company sees the cloud as one of four key growth drivers, the others include mobile, social and analytics. The company badly trails Microsoft and Amazon in the cloud infrastructure space. The company has been hit a bad point in making revenue with the company having had to do with three straight quarters of declining revenue. Analysts have speculated that Red Hat will be the goldmine that finally allows IBM to see an upturn in her fortunes. Ginni Rometty will be hoping that this is the case too as he and his senior management team declared in a shareholder meeting that this decision was nothing close to impulse.
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