IBM buys Red Hat for $34 billion to gain open source, cloud technologies

Big Blue said it hopes to disrupt the cloud market and become one of the largest hybrid cloud providers.
By Jessica Davis
09:47 AM
IBM buys Red Hat

IBM will acquire Red Hat, an open-source technology and software distributor, for about $34 billion, the companies announced late Sunday. The deal is one of the largest tech acquisitions in U.S. history.

Under the agreement, IBM will buy all of the issued and common shares of Red Hat for $190 in cash. Red Hat closed the market on Friday at $116 prior to the announcement.

THE IMPACT

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Red Hat will become a standalone unit of IBM Hybrid Cloud division, with the goal of accelerating IBM’s business model and making IBM the top hybrid cloud vendor, according to officials. IBM will maintain Red Hat’s open source technology, while scaling its portfolio and supporting its developer community.

IBM said it will remain committed to Red Hat’s open governance, open source tech and participation in the open source community, according to the release. Jim Whitehurst, Red Hat president and CEO will continue to lead Red Hat and its management team. Whitehurst will also join IBM’s senior management team under Ginni Rometty, IBM chairman, CEO and president.

ON THE RECORD

“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,” Whitehurst said in a statement.

IBM’s Rometty added: “[The acquisition] changes everything about the cloud market. IBM will become the world’s number one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”

THE BIGGER TREND

There’s been a push for open source technology across the healthcare sector in recent years. Google added an open source version of its AI tool DeepVariant last year, while Partners HealthCare teamed with Persistent Systems to build an open source platform in spring of 2017.

Also, Office of the National Coordinator Chief Don Rucker, MD has been continually pushing for the use and support of open APIs. HIMSS’ new Chief Technology and Innovation Officer Steve Wretling said shortly after his appointment, that open source was one of the emerging technologies that could offer a paradigm shift into how data is processed.

To Rometty, most companies are using just a fraction of their cloud capability. The hope is the acquisition will fuel “shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales,” she said.

The acquisition will help accelerate “hybrid multi-cloud adoption,” while helping clients improve cloud-native business applications and increase portability and security of data and applications in the cloud.

Red Hat and IBM have collaborated for more than 20 years. IBM helped Red Hat develop its enterprise-grade Linux. Red Hat went public in 1999, and in its last fiscal year, earned $259 million on revenue of its $2.92 billion.

From partnering with Delos on cloud apps in 2016, to most recently signing an interoperability pledge and embracing open-source tool FHIR at the White House in August, IBM has continued to enhance its cloud presence over the last few years.

Twitter: @JF_Davis_
Email the writer: jessica.davis@himssmedia.com

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