IBM closed its US$34 billion purchase of Red Hat, sealing the world's second-largest technology deal ever and setting up the iconic USA technology company on a path to try and compete with top software purveyors in the cloud. "Partners open more doors for open source than we can alone and are vital to our success", Red Hat SVP for global channel sales and alliances Mark Enzweiler said in a blog post.
In an interview, Rometty said the deal was driven by what its customers wanted and helping companies "move mission-critical work" to the cloud, offering a variety of hybrid public and private clouds.
International Business Machines Corp (IBM) said on Tuesday it has closed its US$34 billion (S$46.3 billion) acquisition of software company Red Hat, as it looks to ramp up its cloud computing business. If executed as per the plan, IBM can become a strong player in the hybrid cloud market. Some analysts doubt even Red Hat will save it. "They want to build more collaborative cultures, and they need solutions that give them the flexibility to build and deploy any app or workload, anywhere", said Jim Whitehurst, president and CEO, Red Hat.
"As organizations seek to increase their pace of innovation to stay competitive, they are looking to open source and a distributed cloud environment to enable a new wave of digital innovation that wasn't possible before". Red Hat will improve IBM profit margins, and gets the company further into an emerging part of the business known as hybrid cloud. Red Hat's quarterly revenue was up 14.8% compared to the same quarter a year ago.
IBM and Red Hat have deep open source values and experience.
Since 2013, IBM's cloud revenue as a percentage of total revenue has grown sixfold to 25 per cent. The two companies have worked together for more than 20 years to make open source the default choice for modern IT solutions. In the 12 months through the first quarter of 2019, cloud revenue exceeded $19 billion. Going forward, Enzweiler added: "Our investment in the partner ecosystem will continue to be a priority for us and we will approach our relationships with partners with the same open source spirit built on transparency, collaboration, engagement and community".
Red Hat is expected to contribute approximately two points of compound annual revenue growth over a five-year period, IBM said. Red Hat's pioneering business model helped bring open source - including technologies like Linux, Kubernetes, Ansible, Java, Ceph and many more - into the mainstream for enterprises. Together, the two companies have committed to expanding this longstanding commitment through new joint initiatives, addressing education and skills, civic and societal needs and Science, Technology, Engineering, and Math (STEM) workforce development. The company had revenue of $934.10 million during the quarter, compared to analyst estimates of $931.58 million. Services revenue also grew 17 percent.