Submitted by James Azar on Wed, 10/31/2018 - 11:00
A hat worth $34 billion
A hat worth $34 billion

The cloud industry is about to change forever. In an incredible announcement IBM is acquiring the largest open source cloud computing software company called Red Hat for a gigantic $34 billion. 

That’s the largest open source acquisition since Microsoft acquired GitHub for $7.5 billion at the beginning of June this year. Luckily Microsoft never shut down the open source platform and has honored the huge online community that exists and uses it regularly. IBM is planning to run Red Hat the same way.

Red Hat is a very interesting company. It was founded in 1993 and now has offices around the world. It’s open source cloud software but has an annual revenue of $2.4 billion, and this year it has earned $2.9 billion. How does it do that if the code and the use of the platform is absolutely free?

Turns out that the company capitalizes on its consulting services which include assessments, integrations, implementation and app development for its clients. Even though the platform is free, the company charge money for all of these services in order to help their customers implement the software properly.

So why is IBM acquiring Red Hat (besides its incredible annual revenue potential)?

IBM has been feeling a little left behind when it comes to being one of the tech giants in the cloud industry. Microsoft, Apple, and Amazon have all been leaping forward in developments in cloud computing. This is a great opportunity for IBM to step it up and start playing in the big leagues. 

Since Red Hat is the largest cloud computing platform anywhere on the planet, this will turn IBM into the industry leader, literally overnight.

"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," Ginni Rometty, IBM Chairman, President, and Chief Executive Officer said.

"IBM will become the world's #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses."

IBM spokesperson stated that Red Hat will continue to be led by current Red Hat CEO Jim Whitehurst and his management team. The tech giant doesn’t want to disturb the way Red Hat runs things, they will keep all of their facilities and offices as they are.

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Rad Hat CEO Jim Whitehurst said in his statement - "Importantly, Red Hat is still Red Hat. When the transaction closes, as I noted above, we will be a distinct unit within IBM, and I will report directly to IBM CEO Ginni Rometty. Our unwavering commitment to open source innovation remains unchanged,"

"The independence IBM has committed to will allow Red Hat to continue building the broad ecosystem that enables customer choice and has been integral to open source’s success in the enterprise."

According to IBM, the acquisition has been approved by both of the companies’ boards of directors and they are still waiting on approval from the shareholders and the regulators. If all goes well the deal will go through in the second half of 2019. 

On a side note, Rat Hat had a really interesting project for third world countries in which they were seeking to create a $100 laptop for every child. The laptop was going to be operated by energy created by a hand crank. The idea ultimately failed but critics are still raving about that crank! Maybe there’s still a chance that IBM will revive the idea and bring laptops to kids everywhere, who knows?