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IBM Offers to Acquire Red Hat for $34B – Industry Snapshot

Published November 5th, 2018. John Webster, Sr. Analyst with Evaluator Group, breaks down the IBM Red Hat acquisition and provides Evaluator Group's opinion. Download this free report now!

On Sunday October 28,2018, IBM unexpectedly announced its intention to acquire Red Hat in a cash transaction (cash plus debt) valued at approximately $34B. The acquisition has been approved by both companies’ boards and is expected to close sometime in the second half of 2019 pending Red Hat shareholder and regulatory approval. According to the announcement press release, “Red Hat will operate as a distinct unit within IBM’s Hybrid Cloud team.”

Subsequent to the announcements, IBM hosted briefings for financial and industry analysts where executives from both companies positioned their combined strengths and outlined future objectives. Hybrid cloud was the center-piece for both discussions. Here are our key take-aways:

Enterprises have just begun their hybrid cloud journeys with only 20% of workloads in the cloud. This leaves the remaining 80% as a targeted opportunity for the combined entity, estimated by IBM to be worth $1Trillion.

The stated attractions for IBM were Red Hat’s long-standing championship of Linux and Open Source as well as key foundational technologies in hybrid cloud such as OpenShift for containers integrated with Kubernetes management.

As part of IBM’s cloud team, IBM will maintain Red Hat’s brand, got-to-market, partner strategies and facilities. Additionally, IBM will maintain Red Hat’s commitment to Open Source, its customers and partners, and in particular its employees.

Forthcoming product and services directions will include:

  • Enterprise-grade, open hybrid cloud
  • Pathways to migrate traditional workloads to the cloud
  • Consistent management across multiple clouds
  • Hybrid cloud security

IBM will integrate aspects of its product portfolio with the Red Hat “stack.” IBM’s Cloud Private and AI Open Scale solutions were mentioned in this context.

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