IBM has agreed to acquire Red Hat Inc. for 33,4 billions of dollars. IBM will go on the market because it is interested in boosting the cloud.
International Business Machines Corp. will pay $190 per share to cash for Red Hat, a North Carolina-based software development company, according to a joint statement from the companies, today Sunday.
"The acquisition of Red Hat is changing the game, changing everything about the cloud market," said Ginni Rometty, IBM President and CEO.
Rometty, 61, has been trying for years to direct a 107 company to more modern businesses such as cloud, artificial intelligence, and security software.
In its third-quarter results, IBM disappointed investors looking for more progress after six years of declining sales that had turned profitable earlier in 2018. So buying Red Hat will give IBM an immediate boost to its income from cloud market as well as a number of very reliable products software.
"We're going to magnify what Red Hat is doing deeper in many more businesses than they were able to have," Rometty told Bloomberg.
The income from Red Hat, which sells Linux-based software and services, is expected to top $3 billion for the first time this year as the company's Red Hat Enterprise Linux product draws business from large customers. Last quarter the company reported a record 11 contracts worth more than $5 million each and 73 contracts of more than $1 million, according to JMP Securities analyst Greg McDowell.
IBM promised to continue to increase the dividend and not to cut jobs after the deal.
So Red Hat makes IBM "a credible player in the cloud now – both in private and hybrid cloud," said its analyst Bloomberg Intelligence Anurag Rana.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. advised IBM on the agreement and financing.
"Knowing first hand how important the openings are technologies hybrid cloud and how they help businesses, we want to bring these two companies together," said JPMorgan CEO Jamie Dimon.
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