October 29, 2018

IBM cloud to get a boost with USD 34 billion acquisition of Red Hat

With this acquisition, IBM cloud aims to expand their global cloud footprint in a bid to compete against the likes of Microsoft and AWS.

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IBM Cloud are all set to acquire open source software company Red Hat in a USD 34 billion deal. With this acquisition, IBM seeks to aggressively expand across the global cloud market by providing a variety of products, services and solutions, in a bid to compete against the likes of AWS, Microsoft and Alibaba.

According to IBM Cloud, Red Hat, which sells software and services based on the open source Linux-operating system, has a strong market presence globally and understands the needs of enterprise customers. They claim that Linux, which was once a fringe movement in the software industry, is now a core part of many enterprises such as Facebook, Google etc.

By acquiring Red Hat, IBM Cloud believe that they will receive an immediate cloud boost and be able to transform themselves into a cloud-centric company. They say that since Red Hat is a major player when it comes to building cloud services, IBM can leverage this asset and integrate it into their Watson-branded AI services to help enterprises reach business goals faster.

Speaking about the acquisition, Ginni Rometty, IBM’s Chairman and CEO at IBM, commented:

The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. We will scale what Red Hat has deeply into many more enterprises than they’re able to get to.

This is a premium company. If you look underneath, this is strong revenue growth, strong profit strong free cash flow. This is an acquisition for revenue growth, this is not for cost synergies.

IBM Cloud claim that the acquisition will help them reach deeper pockets globally to offer a growing range of products that makes it easy for companies to build cloud-like platforms at their own data centers and manage applications that run on multiple cloud computing services.

Professionals and market analysts opine that this acquisition will benefit IBM since they understand how important open and hybrid technologies are in helping businesses unlock valuable services for customers. It will be interesting to watch how IBM takes their competitors head-on, following Microsoft and AWS signing respective deals to accelerate cloud adoption.

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