IBM CEO Rowland has been expanding subscription-based software products in the face of sluggish software sales and declining demand for mainframe servers. The acquisition of Red Hat is a game-changing move, and IBM will become the worlds largest hybrid cloud provider, providing the only open cloud solution for other companies to unlock full cloud value for their business, she said.
IBM, with a market capitalisation of about $114 billion, is willing to pay $190 a share for Red Hat, 62% above Fridays closing price. Red hat was founded in 1993, specializing in the development of open source system Linux. Headquartered in Raleigh, North Carolina, the company charges a fee for developing customization capabilities, providing system maintenance and technical support to corporate customers, which provides IBM with lucrative deposit revenues.
The acquisition also shows that established technology companies are turning to mergers and acquisitions to expand their scale and resist competition, especially in the cloud computing sector where customers use enterprise software to consolidate vendor relationships to save money. IBM hopes the deal will help it catch up with Amazon, Alphabet and Microsoft in its fast-growing cloud business. In the past five years, IBM shares have fallen by about 1/3, while red cap shares have risen 170% in the same period.
IBM nicknamed big blue (its blue computer was once in full bloom) was founded in 1911. Over the years, the companys revenues have been declining, forcing it to shift from computer manufacturing to new technology products and services, and recent projects include artificial intelligence and lines of business named after its supercomputer Watson.
IBM, a frequent buyer in the M&A market, bought Cognos, a Canadian business software maker, for $5 billion in 2008, Softlayer, a cloud infrastructure provider, for $2 billion in 2013, and Weather Channels data assets for more than $2 billion in 2015.
Other big technology companies have recently transformed themselves through mergers and acquisitions, such as Microsofts $7.5 billion acquisition of Github, an open source software platform developer, this year. Chip company Broadcom bought software maker CA for nearly $19 billion, and Adobe bought marketing software maker Marketo for $5 billion.
IBMs main rival, Dell, started investing heavily in software and cloud computing two years ago to acquire EMC, a data storage company, for $67 billion, with an 82% stake in VMware, a virtualization software company. IBMs deal with Red Hat will be completed in the second half of 2019, and IBM plans to suspend share repurchases in 2020 and 2021 in order to complete the deal.
IBM said that after the acquisition, red hat continued to be led by company CEO Jim White Hearst and its management team. Red hats headquarters, facilities, brands and business practices remain unchanged. Goldman Sachs and JPMorgan Chase provided funding for IBMs trading advisers, and Guggenheim Partners LLC served as Red Hats adviser. (Mu Xiulin)
US media commented on IBMs acquisition of red hat: huge impact on Linuxs open source world
This move is of great significance to IBM. After 10 years of delving into artificial intelligence and block chain technology, IBM has little to show. The company has returned to the field of business services traditionally good at.
Red hat is a household name for programmers, and is familiar to many ordinary people. Admittedly, especially in cloud computing and Linux ecosystems, Red Hat is an important company with many businesses.
The acquisition will have a huge impact on the entire Linux ecosystem as well as on the two companies involved.
After all, Red Hat is an enthusiastic contributor to several major Linux projects, playing an important role in developing LibreOffice and GNOME, as well as the kernel itself.
US media: IBM red hat is a good thing and can challenge Amazon Microsoft.
Red Hats Linux version of open source software is widely used on corporate computer servers and is one of the factors driving the abandonment of bulky mainframes sold by IBM and others. Recently, Red Hat has become a major advocate of cloud computing and an alternative to technology giants like Amazon and Microsoft, which want to attract customers through their proprietary cloud computing technologies.
If we fight alone, IBM and Red Hat Inc are bound to lag behind in computing industry. IBM is too dependent on the past to foresee the future of technology. Red Hat Inc is too small to compete with giants. But with the $34 billion deal, the two companies may be able to work together to chart a new course of development. IBM paid a high price for the acquisition, but if properly managed, the merger could pose a serious threat to Amazon, Microsoft and other companies that are trying to reshape the computing industry, which is worth $2 trillion.