IBM Closes Its $34 Billion Acquisition of Red Hat

Posted on July 9, 2019 by Paul Thurrott in Cloud with 15 Comments

IBM announced today that it has closed its $34 billion acquisition of commercial open source pioneer Red Hat. IBM says it will “preserve” Red Hat’s independence and neutrality and that the two will together deliver a next-generation hybrid multi-cloud platform.

“When we talk to customers, their challenges are clear: They need to move faster and differentiate through technology,” Red Hat president and CEO Jim Whitehurst said in a prepared statement. “They want to build more collaborative cultures, and they need solutions that give them the flexibility to build and deploy any app or workload, anywhere. We think open source has become the de facto standard in technology because it enables these solutions. Joining forces with IBM gives Red Hat the opportunity to bring more open source innovation to an even broader range of organizations and will enable us to scale to meet the need for hybrid cloud solutions that deliver true choice and agility.”

IBM chairman, president, and CEO Ginni Rometty concurs.

“Businesses are starting the next chapter of their digital reinventions, modernizing infrastructure and moving mission-critical workloads across private clouds and multiple clouds from multiple vendors,” she said. “They need open, flexible technology to manage these hybrid multi-cloud environments. And they need partners they can trust to manage and secure these systems. IBM and Red Hat are uniquely suited to meet these needs. As the leading hybrid cloud provider, we will help clients forge the technology foundations of their business for decades to come.”

Microsoft may take exception to the term “leading hybrid cloud provider,” but the IBM/Red Hat deal is momentous regardless. It is the third-largest technology acquisition ever, after Dell’s $67 billion acquisition of EMC and Avago $37 billion Broadcom acquisition. And it provides IBM will a second life in the trillion-dollar battle for the cloud, which is now led by Amazon and Microsoft.

IBM’s strategy is exactly what I’ve proposed that Microsoft do: Instead of simply offering a straight-up alternative to the market leader, Amazon AWS, the firm will instead work with others in the marketplace.

“Today people have five to 15 different public clouds and move data between them,” Rometty told Bloomberg. “The platform we are talking about has to run on other people’s clouds too. [IBM will offer the first hybrid multi-cloud platform, providing the glue to connect various clouds together.]  You’ll hear others say hybrid cloud and then only connect their public to their private clouds. Well, that’s not that helpful for a client. It has to be multi-cloud.”

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