IBM has reached an agreement to buy Red Hat for $34 billion, a more than 60% premium to Red Hat’s share price on Friday. The deal is the third-largest technology acquisition in history and the largest for a software company, surpassing the $26.2 billion Microsoft paid for LinkedIn in June 2016; it also demonstrates Big Blue’s commitment to the growth of the cloud computing market, currently dominated by Amazon, which controls more than a third of the market, followed by Microsoft, IBM, Google and Alibaba.
Amazon’s slice of the cloud computing pie has been stable for more than three years, despite a tripling of the market size in its different models in that time to an estimated $15 billion, representing growth of 51%.
The acquisition makes sense for IBM, which has spent years shedding hardware and instead developing recurring value-added services: Red Hat, one of the great success stories in the free software world, will maintain its management, with Jim Whitehurst at the helm and will be independently run within IBM’s portfolio of cloud computing services, reporting to Ginni Rometty, its Chair, CEO and President.
The idea is to position a neutral hybrid cloud product for companies that often see Amazon, Microsoft or Google’s as requiring partially proprietary pieces that hinder mobility between services. The deal will also strengthen IBM’s…
