IBM acquired Red Hat for $34 billion making it the biggest open-source acquisition ever

In probably the biggest open source acquisition ever, IBM has acquired all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, representing a total enterprise value of approximately $34 billion. However, if this deal is more of a business proposition than a community contributor is a question.

Red Hat has been struggling on the market recently. Red Hat missed its most recent revenue estimates and its guidance fell below Wall Street targets. Prior to this deal, it had a market capitalization of about $20.5 billion. With this deal, Red Hat may soon take control of it’s sinking ship. It will also remain a distinct unit within IBM. The company will continue to be led by Jim Whitehurst, Red Hat’s CEO and Red Hat's current management team. Jim Whitehurst also will join IBM's senior management team and report to Ginni Rometty, IBM Chairman, President, and Chief Executive Officer.

Why is Red Hat joining forces with IBM?

In the announcement, Jim assured that IBM’s acquisition of Red Hat will help them accelerate without compromising their culture and policies. He said, "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.” He also added that, “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."

What is IBM gaining from this acquisition?

IBM believes this acquisition to be a game changer. "It changes everything about the cloud market," said Ginni, "IBM will become the world's #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.

IBM and Red Hat will accelerate hybrid multi-cloud adoption across all companies. They plan to together, “help clients create cloud-native business applications faster, drive greater portability and security of data and applications across multiple public and private clouds, all with consistent cloud management.”

"IBM is committed to being an authentic multi-cloud provider, and we will prioritize the use of Red Hat technology across multiple clouds," said Arvind Krishna, Senior Vice President, IBM Hybrid Cloud. "In doing so, IBM will support open source technology wherever it runs, allowing it to scale significantly within commercial settings around the world."

IBM assures that it will continue to build and enhance Red Hat partnerships with major cloud providers. It will also remain committed to Red Hat's open governance, open source contributions, participation in the open source community and development model. The company is keen on preserving the independence and neutrality of Red Hat's open source development culture and go-to-market strategy.

The news was well received by the top Red Hat decision makers who embraced this with open arms. However, ZDNet reported that many RedHat employees were skeptical:

"I can't imagine a bigger culture clash."

"I'll be looking for a job with an open-source company."

"As a Red Hat employee, almost everyone here would prefer it if we were bought out by Microsoft."

People’s reactions on twitter on this acquisition are also varied:

https://twitter.com/samerkamal/status/1056611186584604672

https://twitter.com/pnuojua/status/1056787520845955074

https://twitter.com/CloudStrategies/status/1056666824434020352

https://twitter.com/svenpet/status/1056646295002247169

Read more about the news on IBM’s newsroom.

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