IBM to acquire open-source software company Red Hat for $34B

IBM agrees to acquire open-source software maker Red Hat for $34B; a deal that will make the struggling legacy IT brand the biggest hybrid computing service in the world.

Last night, Reuters reported that IBM will acquire US software company Red Hat for $34B, including debt, as it attempts to move from hardware into higher-margin products.

This is IBM’s biggest acquisition by far, and the company will end up buying Red Hat at a 63% premium over its closing share price on Friday.

Red Hat is red hot

Founded in 1993, Red Hat specializes in Linux operating systems, AKA the most popular open-source software in the biz.

The North Carolina-based company charges fees to its corporate customers for custom features, maintenance and technical support, and is expected to top $3B in revenue this year.

This is a big win for the struggling IT giant

IBM shares have lost almost a 3rd of their value in the last 5 years, while Red Hat shares are up 170% over the same period.

With the acquisition, IBM hopes it can ward off competition from cloud juggernauts like Amazon, Alphabet, and Microsoft (who acquired GitHub, another open source software company, for $7.5B 3 days ago). 

Not to mention, the deal will make IBM the largest hybrid cloud provider in the world.

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