In its bid to become the world’s leading provider of open source cloud software, IBM announced Sunday it will acquire Red Hat in a deal valued at about $33.4 billion.
Red Hat has been the model for how to make money with open source software by offering integrated services for enterprise Linux, partnerships such as its alliance with former foe Microsoft, and more recently its push to containers and Kubernetes.
In making the announcement, IBM CEO Ginni Rometty said, “Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs. The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to the hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.”
IBM pledged to continue Red Hat’s commitment to open governance and participation in the open source community.
Red Hat will join IBM’s Hybrid Cloud team as an independent unit with its current product portfolio, go-to-market strategy and unique development culture, according to the announcement. Red Hat CEO Jim Whitehurst will continue to lead the unit with his current management team.
“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,” Whitehurst said in the announcement. “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 — all while preserving our unique culture and unwavering commitment to open source innovation.”
It also will continue to build on its partnerships, such as with Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more.
IBM and Red Hat have been partners for 20 years, collaborating on enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers. These innovations have become core technologies within IBM’s $19 billion hybrid cloud business. Both are major open source contributors.
Big Blue will pay $190 per share for the Raleigh, N.C.-based software company, a more than 60 percent premium to Red Hat’s closing stock price Friday.
Red Hat in January acquired CoreOS, a former rival competing to offer slimmed-down, container-focused Linux distributions. At KubeCon + CloudNativeCon in Copenhagen in early May, Red Hat’s Brandon Philips, in an episode of The New Stack Makers, talked about what it’s been like merging the CoreOS and Red Hat teams.
The CoreOS acquisition followed the purchase of CodeEnvy, the makers of the first fully-functional collaborative cloud-based integrated development environment. Red Hat has integrated CodeEnvy’s IDE Eclipse Che into OpenShift, the platform that Red Hat has developed over the span of several years. OpenShift is at its core a container-based technology, deeply integrated with Kubernetes, the orchestration technology platform for multi-cloud deployments. Red Hat describes its OpenShift as an online development environment for planning, creating, and deploying hybrid cloud services, which speaks to the fit IBM sees with Red Hat in its announcement about the acquisition.