IBM Acquires Open Source Specialist Red Hat For $34 Billion

IBM has revealed on Sunday that it will acquire Red Hat, an open source company that is best known for the Red Hat Enterprise Linux operating system.

While it might seem strange for IBM to buy out a company that basically offers its product for free, there are companies that pay Red Hat to support those products, with Red Hat taking in around $3 billion in revenue every year. This acquisition is IBM’s largest deal so far and the third-biggest in U.S tech history.

Red Hat will become a unit of IBM’s Hybrid Cloud division and Red Hat’s CEO Jim Whitehurtst will be joining IBM’s senior management team and will be reporting directly to CEO Ginni Rometty.

Ginni Rometty, Chairman, President and CEO IBM with James M. Whitehurst, CEO of Red Hat

“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.”

– Ginni Rometty, IBM Chairman, President and Chief Executive Officer

Both companies have been facing a number of issues in the past years – IBM has been struggling to transform itself into a cloud computing business and cancer center, only MD Anderson backed away from their contract with the company. Red Hat on the other hand has been struggling with their share prices after a disappointing June financial forecast.

The two could prove to be a good fit for each other, they have been partnering up for 20 years, after all; with IBM shifting from hardware into services and Red Hat still being allowed to operate as a standalone unit, we could be seeing a new start for both companies.

The deal, after being subjected to all the necessary approvals and conditions, is expected to close in late 2019.