- Acquisition positions IBM as the leading hybrid cloud
provider and accelerates IBM's high-value business model, extending
Red Hat's open source innovation to a broader range of clients
- IBM preserves Red Hat's independence and neutrality; Red
Hat will strengthen its existing partnerships to give customers
freedom, choice and flexibility
- Red Hat's unwavering commitment to open source remains
unchanged
- Together, IBM and Red Hat will deliver next-generation
hybrid multicloud platform
ARMONK, New York and RALEIGH, North Carolina, July 9, 2019 /PRNewswire/ -- IBM (NYSE: IBM)
and Red Hat announced today that they have closed the
transaction under which IBM acquired all of the issued and
outstanding common shares of Red Hat for $190.00 per
share in cash, representing a total equity value of
approximately $34 billion.
The acquisition redefines the cloud market for business. Red
Hat's open hybrid cloud technologies are now paired with the
unmatched scale and depth of IBM's innovation and industry
expertise, and sales leadership in more than 175 countries.
Together, IBM and Red Hat will accelerate innovation by offering a
next-generation hybrid multicloud platform. Based on open source
technologies, such as Linux and Kubernetes, the platform will allow
businesses to securely deploy, run and manage data and applications
on-premises and on private and multiple public clouds.
"Businesses are starting the next chapter of their digital
reinventions, modernizing infrastructure and moving
mission-critical workloads across private clouds and multiple
clouds from multiple vendors," said Ginni
Rometty, IBM chairman, president and CEO. "They need open,
flexible technology to manage these hybrid multicloud environments.
And they need partners they can trust to manage and secure these
systems. IBM and Red Hat are uniquely suited to meet these needs.
As the leading hybrid cloud provider, we will help clients forge
the technology foundations of their business for decades to
come."
"When we talk to customers, their challenges are clear: They
need to move faster and differentiate through technology. They want
to build more collaborative cultures, and they need solutions that
give them the flexibility to build and deploy any app or workload,
anywhere," said Jim Whitehurst,
president and CEO, Red Hat. "We
think open source has become the de facto standard in technology
because it enables these solutions. Joining forces with IBM gives
Red Hat the opportunity to bring more open source innovation to an
even broader range of organizations and will enable us to scale to
meet the need for hybrid cloud solutions that deliver true choice
and agility."
Red Hat will continue to be led by Jim Whitehurst and
its current management team. Whitehurst is joining IBM's
senior management team, reporting to Ginni Rometty. IBM will
maintain Red Hat's headquarters in Raleigh, North Carolina, its facilities,
brands and practices. Red Hat will operate as a distinct unit
within IBM and will be reported as part of IBM's Cloud and
Cognitive Software segment.
Both companies have already built leading enterprise cloud
businesses with consistent strong revenue growth by helping
customers transition their business models to the cloud.
IBM's cloud revenue has grown from 4 percent of total revenue in
2013 to 25 percent today. This growth comes through a comprehensive
range of as-a-service offerings and software, services and hardware
that enable IBM to advise, build, move and manage cloud solutions
across public, private and on-premises environments for customers.
IBM cloud revenue for the 12-month period through the first quarter
of this year grew to over $19
billion. The Red Hat acquisition is expected to contribute
approximately two points of compound annual revenue growth to IBM
over a five-year period.
Red Hat's fiscal year 2019 revenue was $3.4 billion, up 15 percent year-over-year.
Fiscal first quarter 2020 revenue, reported in June, was
$934 million, up 15 percent
year-over-year. In that quarter, subscription revenue was up 15
percent year-over-year, including revenue from application
development-related and other emerging technology offerings up 24
percent year-over-year. Services revenue also grew 17 percent.
The Hybrid Cloud Opportunity
Digital reinvention is at an inflection point as businesses
enter the next chapter of their cloud journey. Most enterprises
today are approximately 20 percent into their transition to the
cloud. In this first chapter of their cloud journey, businesses
made great strides in reducing costs, boosting productivity and
revitalizing their customer-facing innovation programs. Chapter
two, however, is about shifting mission-critical workloads to the
cloud and optimizing everything from supply chains to core banking
systems.
To succeed in the next chapter of the cloud, businesses need to
manage their entire IT infrastructure, on and off-premises and
across different clouds – private and public – in a way that is
simple, consistent and integrated. Businesses are seeking one
common environment they can build once and deploy in any one of the
appropriate footprints to be faster and more agile. IBM's offerings
have evolved to reflect new customer needs and drive greater
growth. The acquisition of Red Hat further strengthens IBM as the
leader in hybrid cloud for the enterprise.
"As organizations seek to increase their pace of innovation to
stay competitive, they are looking to open source and a distributed
cloud environment to enable a new wave of digital innovation that
wasn't possible before. Over the next five years, IDC expects
enterprises to invest heavily in their journeys to the cloud, and
innovation on it. A large and increasing portion of this investment
will be on open hybrid and multicloud environments that enable them
to move apps, data and workloads across different environments,"
said Frank Gens, Senior Vice
President and Chief Analyst, IDC. "With the acquisition of Red Hat,
and IBM's commitment to Red Hat's independence, IBM is well
positioned to help enterprises differentiate themselves in their
industry by capitalizing on open source in this emerging hybrid and
multicloud world."
The collective ability of IBM and Red Hat to unlock the true
value of hybrid cloud for businesses is already resonating among
customers moving to the next chapter of digital reinvention.
"Delta is constantly exploring current and emerging
technology as we transform the air travel experience," said
Ed Bastian, CEO, Delta. "We've been
working with both IBM and Red Hat for years to deliver on that
goal, and as they together build the next generation IT company,
they will be an essential part of our digital transformation."
"As a long-standing partner of Red Hat and IBM, we look forward
to capabilities that these two companies will bring together," said
Michael Poser, Managing Director and
Chief Information Officer, Enterprise Technology & Services,
Morgan Stanley. "We know first-hand how important and impactful
cloud technology contributes to unlocking business value."
IBM Reinforces Commitment to Open Source and Red Hat
Neutrality
IBM and Red Hat have deep open source values and experience. The
two companies have worked together for more than 20 years to make
open source the default choice for modern IT solutions. This
includes the importance of open governance and helping open source
projects and communities flourish through continued
contribution.
With Red Hat, IBM has acquired one of the most important
software companies in the IT industry. Red Hat's pioneering
business model helped bring open source – including technologies
like Linux, Kubernetes, Ansible, Java, Ceph and many more – into
the mainstream for enterprises. Today, Linux is the most used
platform for development. Red Hat Enterprise Linux alone is
expected to contribute to more than $10
trillion worth of global business revenues in 2019. By 2023,
an additional 640,000 people are expected to work in Red
Hat-related jobs.
IBM has committed to scaling and accelerating open source and
hybrid cloud for businesses across industries, as well as
preserving the independence and neutrality of Red Hat's open source
heritage. This includes its open source community leadership,
contributions and development model; product portfolio, services,
and go-to-market strategy; robust developer and partner ecosystems,
and unique culture.
Red Hat's mission and unwavering commitment to open source will
remain unchanged, and Red Hat will continue to offer the choice and
flexibility inherent to open source and hybrid IT environments. Red
Hat also will continue to build and expand its partnerships,
including those with major cloud providers, such as Amazon Web
Services, Microsoft Azure, Google Cloud and Alibaba.
IBM and Red Hat also share a strong commitment to social
responsibility and a sense of purpose for applying technology and
expertise to help address some of the world's most significant
societal challenges. Together, the two companies have committed to
expanding this longstanding commitment through new joint
initiatives, addressing education and skills, civic and societal
needs and Science, Technology, Engineering, and Math
(STEM) workforce development. For more information visit:
https://ibm.com/blogs/corporate-social-responsibility/2019/07/be-open-and-change-the-world/.
For more information on today's news, visit:
https://newsroom.ibm.com/ and https://www.ibm.com/redhat.
About IBM
For more information about IBM, visit
https://www.ibm.com.
About Red Hat, Inc.
Red Hat is the world's
leading provider of enterprise open source software solutions,
using a community-powered approach to deliver reliable and
high-performing Linux, hybrid cloud, container, and Kubernetes
technologies. Red Hat helps customers integrate new and existing IT
applications, develop cloud-native applications, standardize on our
industry-leading operating system, and automate, secure, and manage
complex environments. Award-winning support, training, and
consulting services make Red Hat a trusted adviser to the Fortune
500. As a strategic partner to cloud providers, system integrators,
application vendors, customers, and open source communities, Red
Hat can help organizations prepare for the digital future.
Contacts
IBM
Media Contact:
Vineeta Durani
+1 347-982-4803
vineeta.durani@us.ibm.com
or
Investor Relations:
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+1 914-499-5800
pamurphy@us.ibm.com
Red Hat, Inc.
Media Contact:
Stephanie Wonderlick
+1 571-421-8169
swonderl@redhat.com