IBM’s purchase of Red Hat Inc. is a
$33 Billion bid aimed at catapulting the company into the ranks of the top
cloud software competitors. The cash deal, IBM’s biggest ever by far, boosts
the 107-year-old computer-services giant’s credentials overnight in the
fast-growing and lucrative cloud market — and gives it much-needed potential
for real revenue growth.
The company once synonymous with
mainframe computing has been slow to adopt cloud-related technologies and has
had to play catch-up to market leaders Amazon.com Inc. and Microsoft Corp. in
offering computing and other software and services over the internet.
IBM has seen revenue decline by almost
a quarter. While some of that has been from divestitures, most is from
declining sales in existing hardware, software and services offerings, as the
company has struggled to compete with younger technology companies.
Revenue
at Red Hat, which sells software and services based on the open-source Linux
operating system, is expected to top $3 billion for the first time this year as
the company’s Red Hat Enterprise Linux product attracts business from large
customers. JPMorgan Chase & Co. and Goldman Sachs Group Inc. and
Lazard Ltd. advised IBM on the deal. Morgan Stanley and Guggenheim Partners
were financial advisers to Red Hat, while Skadden Arps Slate Meagher & Flom
provided legal advice.
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