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Oscar Williams

News editor

IBM’s £26bn Red Hat acquisition underscores the growing importance of open source software

IBM has unveiled plans to buy the open source cloud giant Red Hat for $34bn (£26bn), in what would be the biggest software acquisition in history.

The takeover would “completely change the cloud landscape” and make IBM the world’s “number one hybrid cloud provider”, the tech giant claims.

It comes within months of Microsoft’s takeover of Github and highlights the growing appeal of open source software companies to Big Tech.

Red Hat CEO Jim Whitehurst described open source as the “default choice for modern IT solutions” and said that joining forces with IBM would “accelerate the impact of [the technology] as the basis for digital transformation”.

In addition to Microsoft’s Github acquisition, Salesforce has acquired Mulesoft and Cloudera has agreed to merge with Hortonworks this year.

Pending regulatory approval, IBM will buy Red Hat shares for $190 each, significantly higher than their closing price of $116.68 on Friday.

Suman Nambiar, head of AI practice at digital transformation consultancy Mindtree, said “the price IBM is paying ” reflects “the urgency they feel to catch up to Amazon Web Services, Microsoft Azure and others”.

He added: “It will also be interesting to see how IBM benefits from the huge presence Red Hat has in the Open Source ecosystem, though of course they started to bet on Open Source back in 1999, well before many of their peers did.”

The acquisition is US tech’s third biggest, after Dell and EMC’s merger in 2016 and JDS Uniphase’s acquisition of SDL in 2000.

IBM CEO Ginni Rometty described the deal as a “game-changer” and said it “changes everything about the cloud market”.

She added: “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.

“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs. The next 80 percent is about unlocking real business value and driving growth.

“This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.”