IBM Common Stock (NYSE:IBM) has lately been in the spotlight due to its acquisition of Red Hat which it has just finalized at $34-billion, making it the company’s largest deal in its history.
Red Hat is an open-source software provider that is quite popular in the tech scene. It has been on IBM’s radar for quite some time but the tech giant decided that an acquisition was the best course of action a while back. The acquisition plan was announced in October 2018. That finally came into fruition on July 9 after the announcement of the acquisition completion.
IBM’s goal was to finalize the Red Hat acquisition before the end of the second half of 2019 which means that it has actualized that goal with a few months to spare. This also means that the company might start experiencing the benefits of the acquisition before the end of 2019.
Red Hat has a lot to offer to IBM
To put the value of Red Hat into perspective, it reported the revenue figures for its fiscal year 2019 at $3.4 billion. This means that it has a lot to offer to IBM courtesy of the acquisition. However, IBM believes that letting Red Hat operate as a neutral player in the industry is the best direction to make sure that it remains successful.
“Red Hat is going to stay platform neutral. Let’s be extremely clear about that. For this to be successful, it is key that products can run anywhere that clients want them to see,” stated Arvind Krishna, the Senior Vice President of IBM.
Krishna also noted that providing access to the largest ecosystem provides customers with a genuine choice. IBM also intends to let Jim Whitehurst remain as Red Hat’s CEO as part of letting the company operate independently. He will also become part of IBM’s senior management. Whitehurst will report directly to Ginni Rometty who is the current CEO of IBM.
IBM hopes that the Red Hat acquisition will help even out the revenue slumps that it has been experiencing. The company’s revenue growth showed signs of stability in 2018 courtesy of a strong refresh cycle for mainframes. However, IBM still continues to experience revenue declines.