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IBM buys Red Hat for $34 billion

IBM buys Red Hat for $34 billion
[Photo: Pixabay/Pexels]

The price makes it the largest software acquisition in history. IBM confirmed it was buying the Linux enterprise open source provider for $190 per share in cash. That marks a 63% premium over Red Hat’s closing price on Friday. Red Hat offers one of the most popular versions of the Linux operating system and charges fees to corporate clients for maintenance and custom features–making a bulk of its money off of recurring subscriptions revenues.

Those subscription-based revenues are something IBM wants as it looks to beef up its cloud and enterprise offerings so it can better compete against the likes of Amazon, Google, and Microsoft in the sector. Announcing the takeover, IBM CEO Ginni Rometty said:

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. 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. Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs. The next 80 percent 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.”

The deal is expected to officially close sometime in 2019. For interest’s sake, prior to IBM’s takeover of Red Hat for $34 billion, the largest software buyout in history was Microsoft’s purchase of LinkedIn for $26.2 billion in 2016.

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