IBM announced that it purchased Red Hat, an open source cloud computing business, by paying 190 dollars cash per share. IBM paid 34 billion dollars in cash to buy Red Hat. The agreement, approved by both IBM and Red Hat's board of directors, is still pending approval of the legislation, which will be issued by Red Hat shareholders. If everything goes as planned, the purchase will be completed in the second half of 2019.
In fact, this agreement is an indication that IBM will work more on cloud systems. By relying on legacy server businesses, IBM is also stepping into cloud services that combine storage services with cloud-based architecture in the same location / building. As of May of this year, Red Hat and IBM started to work on this project. Apparently; This study was designed as a test drive before the purchase process.
With this acquisition, Red Hat will work as an independent team within IBM's Hybrid Cloud team and will continue to focus on open-source software. Ginni Rometty, Chairman and CEO of IBM, shared his view on this purchase:
The purchase of Red Hat is a game changer. It changes everything in the cloud market. IBM will be the world's number one hybrid cloud provider by offering companies the only open cloud solution that exposes the full value of the cloud for their business.
With this acquisition, IBM added that they will continue to build partnerships with IBM Cloud, including multiple cloud providers, including AWS, Microsoft Azure, Google Cloud and Alibaba.
In the meantime, this acquisition is one of the biggest software purchases ever done. So far, we've seen a big buy-in when Dell purchased EMC for 67 million dollars. Nevertheless, EMC was operating not only on the software side but also on the hardware and storage side.
Finally, it is possible to say that the purchase of Red Hat will take IBM to a different point in the cloud market, as Rometty has pointed out. IBM, which will compete against companies such as Amazon and Microsoft, aims to manage all the processes of businesses from supply to sales chains with the open source new hybrid cloud service.