Earlier in the week, a deal was announced by IBM which could arguably be one of the biggest acquisitions of all time in the tech space, as the company agreed to buy Red Hat, a company famous for its flavour of the open-source Linux operating system that runs on servers for a sum of $34 billion.
As per reports, the deal was officiated as an all-cash deal that was announced by both companies on Sunday, October 28th, however, IBM says that it is making a huge bet by agreeing to the $34 billion deal.
Founded nearly 25 years ago in North Carolina, USA, Red Hat, had a valuation of approximately $20.5 billion at the end of trading on Friday, October 26th, making the offer given by IBM nearly a 60% premium deal.
As per reported by CNBC, this deal is the third-biggest tech deal in the history of U.S. tech.
The timing of this deal is also rather interesting as it has come at a time when most of the major software companies have been making acquisitions, for instance, earlier in the year Microsoft acquired Github for $7.5 billion, also Google and Amazon have been striving to get a firm grip hold in the cloud computing space.
Significantly, IBM has seen its share price drop by almost 30 per cent over the past five years despite its pre-Web 1.0 dominance and reportedly is banking on this acquisition to change that.
In a statement, the CEO of IBM, Ginni Rometty said, “The acquisition of Red Hat is undoubtedly a game-changer,” further adding, “It brings about a completely new perspective to the cloud market.”
“No doubt, it is a major gamble, however, we shall see what has to be done,” Rometty further added.
On Monday, October 29th Aaron Levine, CEO of Box tweeted, “Brilliant move by IBM.”
The CEO of Box concluded by saying, “To entirely transform something, it requires big bets, and this is a good one.”