IBM Is Prepping To Buy Red Hat For RM142 Billion

IBM is reportedly nearing a deal to acquire Red Hat, the software company valued at $20 billion

While AWS and Microsoft haven't had much trouble courting those companies, IBM and Red Hat will attempt to argue that they'll offer the most "open" approach to the hybrid cloud given Red Hat's open-source legacy and their commitment to helping those companies navigate multiple public cloud options, which can be very complicated at older companies that lack cutting-edge IT talent.

IBM (NYSE:IBM) and Red Hat (NYSE:RHT) jointly announced today that IBM would be acquiring Red Hat in a deal valuing the company at $190 per share, representing a staggering nearly 63% premium on Red Hat's closing price Friday. "It changes everything about the cloud market", said Ginni Rometty, IBM's chairman and chief executive officer, in the statement.

"Today is a banner day for open source".

And yes, both companies are aware of the impact this will have on Linux and open source at large. It has more or less survived lately on the server business but the rise of the cloud and cloud providers has seen its name overshadowed and nearly forgotten. IBM would compete in the cloud market by offering an alternative that won't lock customers down to the provider's tools and services.

Red Hat will continue to be led by its president and CEO Jim Whitehurst and its current management team.

"Powered by IBM, we can dramatically scale and accelerate what we are doing today", Red Hat president and CEO Jim Whitehurst wrote in an email to employees today.

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"We will scale what Red Hat has deeply into many more enterprises than they're able to get to", Rometty said in a phone interview. And yes, enterprises will go from Red Hat-a proverbial Switzerland of software and the cloud-to an IBM-Red Hat combination and one throat to choke. While it might be all good on the business side of things, such acquisitions do make open source advocates worry, especially users of the Fedora Linux distribution that's based on and supported by Red Hat.

IBM and Red Hat are no strangers, having been partners for two decades.

IBM's emphasis of hybrid clouds as the reason for the deal shows the company thinks it will be better off tending to workloads that users put in clouds other than its own. I'm sure I am not alone is fearing that IBM could ultimately ruin Red Hat and its offerings.

"IBM is committed to being an authentic multi-cloud provider, and we will prioritize the use of Red Hat technology across multiple clouds" said Arvind Krishna, Senior Vice President, IBM Hybrid Cloud.

The acquisition is subject to regulatory approval and to Red Hat shareholder approval. It intends to maintain Red Hat's headquarters, facilities, brands and practices.

With the deal, IBM and Red Hat are clearly setting their sights on major enterprise companies that have struggled to keep up with younger challengers built around more nimble IT strategies.

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