IBM Acquires Red Hat

IBM this week announced that it will acquire Red Hat, the world's leading provider of open source cloud software, for approximately $34 billion.

"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," said IBM chief executive officer Ginni Rometty. "IBM will become the world's No. 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% along their cloud journey, renting compute power to cut costs," Rometty continued. "The next 80% 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 Red Hat CEO Jim Whitehurst. "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."

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% 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'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. 

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

IBM has pledged to 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. 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.

Red Hat will join IBM's Hybrid Cloud team as a distinct unit. Red Hat will continue to be led by Whitehurst and the current management team. Whitehurst also will join IBM's senior management team and report to Rometty. IBM intends to maintain Red Hat's headquarters, facilities, brands and practices.

"Since the day we decided to bring open source to the enterprise, our mission has remained unchanged," said Paul Cormier, Red Hat's president, products and technologies. "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."

The acquisition has already been approved by both companies' boards, but is still subject to Red Hat shareholder approval. The deal is expected to close in the latter half of 2019.