IBM acquires Red Hat

IBM closed its $34 Billion purchase of Red Hat, sealing the world’s second-largest technology deal ever and setting up the iconic U.S. company on a path to try to compete with top software purveyors in the cloud.

The 108-year-old International Business Machines Corp., once synonymous with mainframe computing, has been struggling to adopt cloud-related technologies. It’s playing catch-up to market leaders Amazon.com Inc. and Microsoft Corp. in offering computing and other software and services over the internet.

Having already fallen behind in the public cloud, IBM is betting big on the so-called hybrid cloud, which allows companies to simultaneously run programs on both their own internal servers and the big public cloud providers, Amazon Web Services and Microsoft’s Azure.

Through Red Hat, IBM will offer clients the chance to merge their private and public clouds -- regardless of which provider they use. Red Hat’s open hybrid cloud technologies will be matched with IBM’s industry expertise and sales teams in more than 175 countries. The platform will allow companies to run and manage their data and applications both on-site and on private and multiple public clouds.

IBM bought Red Hat

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.