IBM set to acquire North Carolina-based Red Hat in $34B deal

IBM set to acquire North Carolina-based Red Hat in $34B deal

IBM shares have lost nearly a third of their value in the past five years, while Red Hat shares are up 170 percent over the same period.

The deal, once it goes through, will make IBM top Hybrid Cloud provider in an emerging $1 trillion growth market.

Moreover, he said, "IBM immediately bolsters its position in today's multicloud world".

The $34 billion deal represents a huge premium over Red Hat's market value of some $20 billion based on its Friday closing price. Red Hat will become part of IBM's hybrid cloud team as a "distinct unit", with the same headquarters in Raleigh, North Carolina, and its brands.

Red Hat is one of the very few companies in the cloud computing sector that has both revenue growth and free cash flow, Rometty, who has been IBM's CEO since 2012, said in an interview with Reuters.

S&P downgraded International Business Machines (IBM) on Monday to A from A+, following the announced US$34bn acquisition of open source software solutions provider Red Hat.

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IBM and Red Hat have announced an agreement that IBM has struck a deal to acquire the Linux and open source software distributor for $34 billion in an all-cash transaction of $190/share.

Founded in 1993, Red Hat specializes in Linux operating systems, the most popular type of open-source software, which was developed as an alternative to proprietary software made by Microsoft Corp.

"Powered by IBM, we can dramatically scale and accelerate what we are doing today". Red Hat's share price was 28 percent down over the past six months.

Venero said he is hopeful IBM will continue the strong channel relationships that Red Hat has built with partners rather than taking deals direct.

Red Hat now has more than 95 offices worldwide, including major software-engineering groups in San Francisco and Boston and a public-policy operation in Tyson's Corner, Va., near the nation's capital. Joining forces with IBM offers all of that, years ahead of when we could have achieved it alone. IBM operates one of its largest corporate campuses in Research Triangle Park and employs several thousand people across the state. Its CEO, Jim Whitehurst, will join IBM's senior management team and will be reporting directly to company CEO Ginni Rometty. The two companies will remain committed to "the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network" open-source licenses and initiatives, according to the companies' joint statement.

"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", said Jim Whitehurst, President and CEO, Red Hat. IBM is acquiring Red Hat for our incredible people and our incredibly special culture and approach to making better software.

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