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IBM closes $34bn Red Hat acquisition

IBM has closed its $34bn acquisition of the open source software giant Red Hat after securing regulatory approval for the record-setting deal.

It is the most valuable ever acquisition of a software company and will pave the way for a significant expansion of IBM’s cloud computing division.

The public cloud market is fiercely competitive, with Amazon Web Services, Microsoft and Google battling it out for businesses’ data and workloads.

But IBM hopes the acquisition will help it to carve out a niche supplying services which bring businesses’ public and private cloud applications together into one platform.

Red Hat specialises in open source technologies such as Linux and Kubernetes that enable businesses to manage data in a range of computing environments.

Ginni Rometty, IBM’s chairman and chief executive, said in a statement: “Businesses are starting the next chapter of their digital reinventions, modernizing infrastructure and moving mission-critical workloads across private clouds and multiple clouds from multiple vendors.”

Jim Whitehurst, the chief executive of Red Hat, added: “[Customers] want to build more collaborative cultures, and they need solutions that give them the flexibility to build and deploy any app or workload, anywhere.”

While hyper-scale providers such as AWS and Microsoft claim to offer greater flexibility than on-premise data centre vendors, the associated cost of refactoring applications for the cloud, twinned with concerns about data governance and security, mean many businesses are holding back a significant proportion of their workloads.

Speaking to press on Tuesday, IBM’s cloud chief, Arvind Krishna, said Red Hat’s developers would retain their independence following the deal: “Red Hat product teams are going to make their decisions on product plan. They’re going to maintain how they work on upstream, they’re going to maintain that commitment on how they both contribute to open source and take from upstream projects for products that are downstream.”

The European Commission granted the deal unconditional approval in June, warning that “any strategy impairing Red Hat’s neutrality would likely damage [its] business, by shifting the focus of customers, developers and partners alike to competing open-source solutions”.