IBM closes US$34bn Red Hat deal, anticipates two-point CAGR jump over five years

IBM has announced that it has closed the acquisition of Red Hat for around US$34bn, noting in its press release that it expects the deal to add two points to its compound annual growth rate (CAGR) over the next five years.

In its press release, IBM said the acquisition marks a seismic shift in the cloud market, with Red Hat’s open hybrid cloud tech merging powers with IBM’s unrivalled scale of innovation and industry expertise.

"[Businesses] need open, flexible technology to manage these hybrid multicloud environments. And they need partners they can trust to manage and secure these systems,” said Ginni Rometty, IBM Chairman, President and CEO, in the company’s statement.

“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."

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Jim Whitehurst, President and CEO of Red Hat, added: "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."  

"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’s HQ, facilities, brands, practices, and leadership team will remain the same under IBM’s wing, with Whitehurst set to join IBM’s senior management team in addition to his role at Red Hat.

IBM’s acquisition comes at a time of explosive growth for the cloud specialist. Red Hat’s annual revenue for fiscal year 2019 reached $3.4bn, representing a year-on-year increase of 15% as well as the indomitable strength of both its offering and consumer demand.