Aiming to dominate the emerging $1 trillion Hybrid Cloud market, software tech major IBM has announced to acquire Open Source Solutions leader and Linux Operating System owner Red Hat for a whopping $34 billion.
“This acquisition is IBM's biggest so far and will provide an open approach to Cloud, featuring unprecedented security and portability across multiple clouds,” said a joint statement late Sunday.
"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. IBM will become the world's top hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses," said Ginni Rometty, IBM Chairman, President and Chief Executive Officer.
While Red Hat will operate as a distinct unit within IBM's Hybrid Cloud team, IBM will acquire all of the issued and outstanding common shares of Red Hat for $190 per share in cash, representing a total enterprise value of approximately $34 billion.
According to industry experts most companies harness only 20 per cent along their cloud journey, renting compute power to cut costs.
"The next 80 per cent is about unlocking real business value and driving growth. This is the next chapter of the Cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimising every part of the business, from supply chains to sales," added Rometty.
"Open source is the default choice for modern IT solutions, and I'm incredibly proud of the role Red Hat has played in making that a reality in the enterprise. Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience," said Jim Whitehurst, President and CEO, Red Hat.
IBM's and Red Hat's partnership has spanned 20 years, with IBM serving as an early supporter of Linux, collaborating with Red Hat to help develop and grow enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers.
IBM and Red Hat will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud.
The Red Hat acquisition by IBM is the third-biggest in the history of US technology. The biggest acquisition was the $67 billion merger between Dell and EMC in 2016 and JDS Uniphase's $41 billion acquisition of optical-component firm SDL in 2000.
Last week, Microsoft closed a $7.5 billion acquisition of the code hosting and collaboration company GitHub.