IBM/ Red Hat Deal

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This topic contains 0 replies, has 1 voice, and was last updated by  Bill Recto 4 months, 3 weeks ago.

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    Bill Recto

    IBM is betting the farm on Red Hat — and it better not mess up


    If your Computer runs on Fedora OS you are affected by this deal.


    International Business Machines (IBM – Get Report) shares slumped to the lowest level in nearly three years Monday after the group said it would pay the equivalent of nearly a third of its market value for Red Hat (RHT – Get Report) in a $34 billion deal that both jump starts its move into the $1 trillion cloud computing market but raises questions over the price it’s prepared to pay for the Linux distributor.

    The stock was also pressured by a decision from Moody’s Investors Service to put IBM’s A1 credit rating on review for a possible downgrade, citing a “substantial increase in leverage” … and a “departure from IBM’s historical acquisition philosophy of making small, tuck-in acquisitions that limit integration risk.”

    IBM will pay $190 each for all of the outstanding shares of Raleigh, North Carolina-based Red Hat, a 63% premium to its Friday closing price of $116.68 and will finance the $34 billion enterprise value deal, which CEO Ginni Rometty called a “game changer” with a mixture of cash and debt. Red Hat will operate as a distinct unit within IBM’s hybrid cloud division, the company said, and will be run by current head Jim Whitehurst.

    “We believe Red Hat is a trusted open source leader with a large enterprise customer base, and a share gainer in its traditional categories (server operating systems, application server markets, middleware) while participating in very strong secular trends such as re-architecting of the data center, cloud computing, virtualization, and big data,” wrote analysts at Oppenheimer. “We question IBM’s ability to extract incremental value from Red Hat, taking into account its M&A track record and mixed stature in the developer community.”


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