IBM inks history’s largest software deal

IBM said on Sunday it has reached a deal to buy open source software company Red Hat for $34 billion, among the biggest tech mergers in history which the computing giant said would enhance its cloud offerings.

If approved it will be the third biggest tech merger in history, according to business news site CNBC. Red Hat said it was the biggest involving a software company.

T he de a l w i l l s e e I BM acquire a ll of t he issued and outstanding common shares of Red Hat for $190 per share in cash, more than $70 above the $116.68 at which Red Hat was trading on close of business on Friday.

“The acquisition of Red Hat is a game-changer. It changes ever y t hi ng about t he cloud market,” said Ginni Rometty, IBM’s cha i r man, president and CEO.

“I BM w i l l b e c ome t he world’s number one hybr id cloud prov ider, offering compa nies t he only open cloud solution t hat will unlock t he full value of the cloud for their businesses.”

Cloud computing refers to t he del iver y of comput i ng ser v ices, i nclud i ng storage and soft ware, over t he internet to achieve economies of sca le.

Hybrid cloud relates to the linking of public and private cloud platforms.

IBM’s Rometty added that most companies are currently being held back in their cloud transformation due to closed platforms.

Once known primarily for its computer hardware, IBM has made cloud computing a priority in its growth strategy, like Amazon and Microsoft.

Over the past few years, the company has been refocusing on markets such as analy tics, mobile and security, grouped under the banner of “strategic imperatives” and designed to of fset t he decline of its t radit iona l act iv it ies. These now represent about ha l f of it s turnover.

Adhering to the adage of not f i x ing what’s not broken, Red Hat will continue to operate as a separate unit.

Red Hat wi l l be led by its president and CEO Jim Whitehurst and its current management team. Whitehurst a lso wil l join IBM’s senior management team and report to Rometty.

‘We made history’

“Today is a banner day for open source,” said Paul Cormier, Red Hat’s vice president and president of products and technologies. “The largest software transaction in history and it’s an open source company. Let that sink in for a minute. We just made history.”

Founded in 1993, Red Hat launched its famous version of Linux OS a year later, becoming a pioneering proponent of the open source movement that arose to counter giants like Microsoft whose models were based on keeping their source code secret.

The Raleigh, North Carolina ba s e d c ompa ny i s t o d a y present in 35 countries a nd employs some 12,000 people, and is one of the best-k nown open-sou rce players whose customers pay for tailor-made solutions.

The company achieved a net profit of $259 million this year on a turnover of $2.9 billion, up 21 per cent compared to last year.