New York: In a $33 billion bid, International Business Machines Corporation (IBM) is set to acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash. This biggest ever cash deal is likely to boost the 107-year-old company’s ranks in the lucrative cloud market amongst the top cloud software competitors.
“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” stated Ginni Rometty, chairman and chief executive officer of IBM, on Sunday. She added, “This is an acquisition for revenue growth, this is not for cost synergies.”
Ever since Rometty, 61, became the CEO of IBM in 2012, the company has seen a drastic decline in the revenue. The major causes of the decline in IBM’s revenue were disinvestments, a decline in the sales of existing hardware, software and services offerings. Rometty has been striving hard to steer the company towards modern tools such as cloud, artificial intelligence and security software.
However, IBM showed inconsistent results. According to the third-quarter earnings report IBM, the cloud revenue rose by 10 per cent to $4.5 billion, but the growth was comparatively slower than the 20 per cent expansion during the second quarter.
According to Jim Suva, an analyst at Citigroup Research, the cash deal may alert the investors about IBM’s actual performance in the area of cloud computing and related technologies. A report by Mint quoted Suva as saying, “We expect investor skepticism around the deal given IBM’s messaging that it is well underway in its transformation.”
“Knowing first-hand how important open, hybrid cloud technologies are to helping businesses unlock value, we see the power of bringing these two companies together,” said CEO of JPMorgan Jamie Dimon. Meanwhile, the revenue of Red Hat, a software and services based company, is expected to hit the $3 billion mark for the first time in 2018 as the company’s Red Hat Enterprise Linux product has acquired a broader customer base.
(With Agency inputs)