IBM will buy Red Hat in a transaction that values the latter at close to $US34 billion. The deal is the most significant tech acquisition of 2018 and is intended to help IBM more rapidly capture a heftier chunk of the multicloud marketing place.

IBM claims this move makes it the number-one hybrid cloud provider in an emerging $US1 trillion growth market.

The company said it would maintain Red Hat’s open source innovation legacy, scaling its vast technology portfolio and empowering its broad developer community, with Red Hat to operate as a distinct unit within IBM’s Hybrid Cloud team.

Red Hat will continue to be led by its chief executive, Jim Whitehurst and the current management team. Whitehurst also will join IBM’s senior management team and report to Ginni Rometty. IBM intends to maintain Red Hat’s headquarters, facilities, brands and practices.

IBM promised to keep building and enhancing Red Hat partnerships, including those with major cloud providers such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud. At the same time, it said Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand its open-source technology portfolio to businesses globally.

Today’s news reflects the reality that global businesses are opting for multiple cloud environments rather than trying to fit everything into a one-size-fits-all model. Research shows that 80 per cent of business workloads have yet to move to the cloud, held back by the proprietary nature of today’s cloud market. This prevents portability of data and applications across multiple clouds, data security in a multi-cloud environment and consistent cloud management.

Speaking on the acquisition, IBM Chairman and Chief Executive Ginni Rometty said “The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. IBM will become the world’s number-one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.

“Most companies today are only 20 per cent along their cloud journey, renting compute power to cut costs,” she said. “The next 80 per cent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimising every part of the business, from supply chains to sales.”

The purchase has been approved by the boards of directors of both IBM and Red Hat. It is subject to Red Hat shareholder approval. It also is subject to regulatory approvals and other customary closing conditions. It is expected to close in the latter half of 2019.

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