IBM pursues Amazon into the cloud with US$33B deal to purchase Red Hat
IBM’s US$33-billion purchase of Red Hat Inc. — the world’s secondlargest technology deal ever — is aimed at catapulting the company into the ranks of the top cloud software competitors.
The cash deal, IBM’s biggest by far, boosts the 107-year-old computer-services giant’s credentials overnight in the fastgrowing 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 Ama- zon.com Inc. and Microsoft Corp. in offering computing and other software and services over the internet.
“We’ve been reshaping IBM for this moment,” chief executive officer Ginni Rometty said in an interview with Bloomberg TV on Monday. “This is all about resetting the cloud landscape and this is the inflection point to do it.”
IBM has been positioning itself as a leader in the so-called “hybrid cloud” market — in which companies run programs on both their own internal servers and the big “public” cloud providers — Amazon’s AWS and Microsoft’s Azure — at the same time. Red Hat, which sells software and services based on the open-source Linux operating system, helps companies bridge different platforms.
IBM has seen revenue decline by almost a quarter since Rometty, 61, took the CEO role in 2012. 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. She has been trying to steer IBM toward more modern businesses, such as the cloud, artificial intelligence and security software with inconsistent results.
IBM shares declined 4.13 per cent to close at US$119.64 in New York on Monday, giving it a market value of US$109.204 billion. The stock has dropped 19 per cent this year through Friday. Red Hat’s stock soared 45.41 per cent to US$169.63 per share.