IBM Acquires Linux Enterprise Software Developer Red Hat in $34 Billion Deal

• IBM has acquired open source enterprise software developer Red Hat for $34 billion.
• The acquisition will complete in the second half of 2019.
• The tech giant will be focusing on open source technology and open source cloud computing solutions.

Red Hat is one of the oldest companies to develop open source enterprise-grade software for Linux. The company has struck a deal with IBM which will see Red being acquired for $34 billion. A joint announcement was made on IBM’s website which revealed that the tech giant would be paying Red Hat in cash for all existing shares.

The enterprise software company will become part of IBM's Hybrid Cloud division. Red Hat CEO Jim Whitehurst revealed that he will be joining the senior management team at IBM and will working under CEO Ginni Rometty. Goldman Sachs, J.P. Morgan, and Lazard were financial advisors to IBM while Morgan Stanley and Guggenheim advised Red Hat.

Red Hat saw its inception 25 years ago and was a Linux distributor. Linux is an open-source OS that is used in a wide array of technologies and powers anything from simple household electronic devices to enterprise-grade servers and data centers. Red Hat went public in 1999 and generated $2.92 billion in revenue last year. The company has seen its revenue grow 21% between the fiscal years of 2017 and 2018.

Both companies revealed in the joint announcement that “they will help clients create cloud-native business applications faster, drive greater portability and security of data and applications across multiple public and private clouds, all with consistent cloud management. In doing so, they will draw on their shared leadership in key technologies, such as Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation.”

Red Hat has been in talks with other companies for years about an acquisition, but even companies like Google declined. IBM engaged in negotiations and got into an agreement with the Linux software developer recently. IBM has been falling behind Amazon and Microsoft in the world of cloud infrastructure despite its contribution in technology, and the new acquisition may help the tech giant to catch up.

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