IBM Gets Red Hat for $34 Billion

IBM and Red Hat have inked the deal. IBM is acquiring Red Hat for approximately $34 billion in order to become the number one hybrid cloud provider in the world.

If you think open source projects don’t make money, it’s time to think again. A few months back Microsoft bought GitHub for $7.5 billion. SUSE Enterprise Linux was sold for $2.5 billion. Today IBM announced that it is buying Red Hat for approximately $34 billion.

Red Hat, the first billion dollar open source company is one of the strongest players in the containers and the cloud game. IBM has been lagging behind the likes of Microsoft and Google in the trillion dollar cloud market. So to strengthen their position in this field, IBM is acquiring Red Hat.

IBM will acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, which is approximately $34 billion. 

The deal was facilitated by JPMorgan from IBM side and Guggenheim Partners from Red Hat side.

Red Hat will join IBM’s Hybrid Cloud team as a distinct unit. It will continue to be led by Jim Whitehurst and the current Red Hat management team.

“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

Red Hat is obviously excited about the deal:

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

Jim Whitehurst, President and CEO, Red Hat
IBM Acquires Red Hat Linux

As per the announcement, “IBM will remain committed to Red Hat’s open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem. In addition, IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network.”

This deal makes IBM the number one player in the cloud market. It will be interesting to see if other players Microsoft and Google make similar moves.

SUSE has already been sold to EQT and Debian is a community owned project so that leaves Ubuntu. Can Ubuntu be the next acquisition target, perhaps by Microsoft? Only time will tell.

Update: On July 9, 2019, IBM finalized the deal with Red Hat and now Red Hat is officially part of IBM.

What are your views on IBM-Red Hat deal? Will it impact the open source projects by Red Hat? Do you see the recent trend of acquisition of Open Source companies as a ‘threat to the open source culture’? So share your views in the comment section.

Article was originally published in October 2018. It has been updated since then.

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  • Wish Redhat was originally organized as a Worker Cooperative (100% worker owned company) — this would not have happened.

  • I have been expecting the massive and incredibly fast transition to FOSS by big business, and think this is just the tip of the proverbial iceberg. Supply and demand in the information age should logically drive the business market towards FOSS.

    Customers have power, choice and freedom… and what could be more competitive than market leading products at no cost. Once enough market share becomes FOSS, a tipping point is likely due to the double-whammy of innovation and the market economy. Development becomes increasingly driven by the open source community and in-turn produces better quality products and services. This trend will continue and naturally replace proprietary competitors.

    Microsoft will have to make the switch to FOSS in the near future I believe, and no doubt Ubuntu would be a logical acquisition target. I had to hold back a wince when I read it though, lol. It will be interesting to see if those who are passionate about FOSS will embrace companies like Microsoft and Google, and how far they will go to win over the community.

    • Microsoft is trying to gain control of open source. IBM also. Remember this is two companies that had control the computer industry. They are trying to rise again by buying out these companies, like Red Hat ,etc.

  • Indeed I am also wondering what does these two acquisitions mean for the values and the world of FOSS !!??
    In my eyes, FOSS world with its proponents, evangelists, initiators, ideologists …and the FOSS ethic have won the “battle” of software technology 40 years after FOSS ideals were envisioned. Yes the moral person is always the stronger.
    This is independent from becoming rich (MS, IBM, Apple, ……)
    But what now ? Has FOSS started to sell his soul to the “devil” ?