IBM to gobble Red Hat for $34bn - yes, the enterprise Linux biz

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"It changes everything about the cloud market", IBM CEO Ginni Rometty said in a statement.

IBM announced today that it will acquire open source firm Red Hat for approximately $34 billion in cash and debt. It earned its distinction for being one of the first companies to make a living from open source software the way it was meant to be, by offering services in relation to operating and maintaining Linux systems, especially on the business side.

And yes, both companies are aware of the impact this will have on Linux and open source at large.

Which is where the deal shows IBM's weakness because its own IaaS remains unsophisticated compared to rivals and efforts to renovate it have struggled. "IBM will become the world's".

Buying Red Hat to give it management tools across multiple IaaS clouds, and probably an easier route to market for its software delivered as SaaS, therefore means a chance to turn IaaS weakness towards IBM's strengths. Between them, IBM and Red Hat have contributed more to the open source community than any other organisation.

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With this acquisition, Rometty said IBM will "remain committed" to Red Hat's open governance, open source contributions, participation in the open source community and development model, while also "fostering" its widespread developer ecosystem.

"Most companies today are only 20 per cent along their cloud journey, renting compute power to cut costs".

Rometty, 61, has been trying for years to steer the 107-year-old technology giant toward more modern businesses, such as the cloud, artificial intelligence and security software. "Imagine Red Hat with greater resources to grow into the opportunity ahead of us", Whitehurst told employees in an email Sunday afternoon. However, companies that are deploying workloads on public cloud providers tend to prefer Ubuntu Linux for that work, and that coupled with acceleration toward the cloud in general has stalled revenue growth in that category. But that is a shrinking business. "Together we can become *the* leading hybrid cloud solutions provider". Since the day we made a decision to bring open source to the enterprise, our mission has remained unchanged.

For all that, maintaining Red Hat's standing and culture could prove hard for the company once known as Big Blue.

The Raleigh, N.C. -based software company will operate as a distinct unit within IBM's Hybrid Cloud team. "But we will have to see if AWS and Google will partner as well with Red Hat now under new ownership as they did in the past". The deal, which is also subject to regulatory review, is expected to close in the second half of 2019. One analyst, Trip Chowdhry at Global Equities Research, suggested in a note to clients that China, whose infrastructure is built on Linux, might not grant its approval.

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