back to article Official: IBM to gobble Red Hat for $34bn – yes, the enterprise Linux biz

IBM intends to acquire enterprise Linux maker Red Hat for $34bn (£27bn). Following rumors of a deal over the weekend, Big Blue announced the move here, in the past hour, and Red Hat's take is here. IBM made an offer of $190 per issued and outstanding Red Hat share, which was accepted: the current price stands at $116. …

So exactly how is IBM going to tame employees that are used to going to work in shorts and dressing gown and do office meetings on the beach

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Easy, the same way they deal with their existing employees. It'll be the IBM way or the highway. We'll see the usual repetitive and doomed IBM strategy of brutal downsizings accompanied by the earnest IBM belief that a few offshore wage slaves can do as good a job as anybody else.

The product and service will deteriorate, pricing will have to go up significantly to recover the tens of billions of dollars of "goodwill" that IBM have just splurged, and in five years time we'll all be saying "remember how the clueless twats at IBM bought Red Hat and screwed it up?"

One of IBM's main problems is lack of revenue, and yet Red Hat only adds about $3bn to their revenue. As with most M&A the motivators here are a surplus of cash and hopeless optimism, accompanied by the suppression of all common sense.

Well done Gini, it's another winner.

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Going to be hard.

IBMers are just just - Imbers. Theyve limited skills outside of ibm products. Most are not developers.

RH is a pure development and support play.

Id guess RH would easily find other employers.

Ibm have just bought the support contracts.

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> IBM belief that a few offshore wage slaves can do as good a job as anybody else.

But this time it's different. Redhat is opensource so IBM won't have to pay the workers at all, they're all free - profit

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Joke

So exactly how is IBM going to tame employees that are used to going to work in shorts and dressing gown and do office meetings on the beach

Ginny will get in her Chopper to go and give them a dressing down

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But this time it's different. Redhat is opensource ... which means that the biggest asset that RH could possibly bring to the table is the knowledge in the heads of its employees. If they are gone, nothing is stopping them from joining CentOS team or perhaps setting up a new distribution based entirely on RH (also with commercial support, because they know how to do it).

But I think this deal is about something else. The winner here is Power CPU architecture, which will receive "virtually unlimited" support from the favourite distribution of banks and other large (and medium-sized) institutions.

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You don't really think banks will change from x86 to Power because IBM has bought RedHat do you?

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so IBM won't have to pay the workers at all

AFAICS IBM already pay a lot of people a lot of money to work on Linux. Whatever else they may or may not be aware of they'll be well aware TANSTAAFL...

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Anonymous Coward

well...

FWIW, Red Hat has never quite been that kind of company. RH is quite old, remember, and definitely East (nearly) Coast, not West Coast. It was never a Valley company. I don't think I've ever seen anyone in an RH office in a dressing gown :) It's maybe not shirt sleeves for engineers, but at least a clean t-shirt...in general the RH culture has always been a bit more buttoned-down than a Valley company would maybe be.

Now, the 'working from home' thing might be interesting...

(posting anon for obvious reasons)

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Nobody will switch from X86 to Power (well, there may be the odd few, driven primarily by application requirements and maybe a CIO here or there with real courage as Power is a amazing hardware platform) but IBM needs a viable, perceived as modern OS such as Linux to keep the AS/400 iSeries and AIX folks from running off. And they are wishfully thinking, hoping and praying that the same folks and more will perceive and adopt this in the same way they did the Sysrem/34, System/36, System/38 and subsequently AS/400 and now Power as they did so many decades ago. Alas, IBM has never done a good job marketing these superior operating systems and hardware plus has been overcharging for decades as well, milking the iSeries base terribly in my opinion. Expect more of the same. I have been out of this loop for a while now but if it were me I would be calling my SUSE rep. Years ago they used to say Linux is Linux is Linux but it’s NOT. Oh well I hope the best for Power but time will tell.

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Anonymous Coward

You don't really think banks will change from x86 to Power because IBM has bought RedHat do you?

Probably not, but it likely will kill any of RedHat's work on Arm. IBM will want to push them to stick to Power development.

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innovation and work culture

Maybe they don't really buy primarily the product but the work culture and more innovative talent. It brings more developement and less hierachies. This has to be seen, what is sure is that they will buy a lot of talent.

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Ginny will get in her Chopper to go and give them a dressing gown.

FTFY

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Anonymous Coward

Re: well...

I don't think I've ever seen anyone in an RH office in a dressing gown :) It's maybe not shirt sleeves for engineers, but at least a clean t-shirt...in general the RH culture has always been a bit more buttoned-down than a Valley company would maybe be.

About 25 years ago I was asked to run a Unix internals class for a group of IBM lab engineers who were working on bringing some of mainframe land into the Unix age. No doubt influanced by things like DPM's Diary (this was before El'Reg existed even as a news letter) I was expecting the blue suits, white shirts and blue ties. But like lab engineers the world over, this wasn't their look. The manager arrived on the first morning in an Iron Maiden tee shirt and their wasn't a corporate clone in the team.

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Anonymous Coward

You may have got it the wrong way around!

This may be more about moving from POWER to x86 (and maybe back again later!). Let me explain. IBM have a massive AIX customer base who want to get off POWER onto more commodity x86 kit. In order to migrate there needs to be a critical mass of enterprise application stacks that run on BOTH the old (POWER+AIX) and new (x86+Linux) plus large 'migration projects'. The medium to long term revenue is in the giant projects to migrate and around software licensing and support contracts once everything has gone 'to the cloud'. When IBM are the largest supporter of the most commonly used operating systems in server land while offering a reasonable alternative to AWS (or stay on AWS if you must!) then this is a rather canny and strategic investment for them. Far less likely to have legs is IBM using their half a million internal users as beta testers for an enterprise-focused RHEL desktop distribution, challenge there is that IBM sold off the x86 hardware business to Lenovo and the Apple/Microsoft partnerships are not interested in alternatives to OSX and Windows.

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Re: innovation and work culture

"what is sure is that they will buy a lot of talent."

And what do IBM do with talent?

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FAIL

This will not end well

Except for the Red Hat folks who have stock options.

BTW, what's IBM's upper age limit for employees who are not in the C-suite, 55?

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"they will buy a lot of talent."

Not necessarily. They will certainly pay for a lot of talent: whether it's still there in six months' time is another question entirely.

If IBM's corporate culture manages to drive away a sufficient number of good RH staff (who, arguably, are pound-for-pound a more valuable resource than the average IBM equivalent) then the money will have been a spectacular waste. After all, if they'd merely wanted an OS, they could be using CentOS :-) and my guess is IBM will have to work hard to overcome RH customers' natural (and IMHO largely justified) suspicion of Big Blue.

What happens over the next 12—24 months will be ... interesting. Usually the acquisition of a relatively young, limber outfit with modern product and service by one of the slow-witted traditional brontosaurs does not end well.

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Anonymous Coward

Re: "they will buy a lot of talent."

I found that those with real talent that matched IBM needs are well looked after.

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Anonymous Coward

@AC

You don't really think banks will change from x86 to Power because IBM has bought RedHat do you?

Probably not, but it likely will kill any of RedHat's work on Arm. IBM will want to push them to stick to Power development.

First, IBM will be hands off. At least for the first year it will be a separate company.

Based on the PR and statements made by IBM, they will not touch Red Hat (RH). They know that if they do, their investment will go poof as the people walk away and go work for someone else.

Second... the deal itself makes no sense.

What's the play?

They say its for the cloud, but really?

They say its for an open cloud / hybrid experience. Buying RH doesn't add to this when they could have partnered.

As to hardware, IBM got out of that long ago. IBM sells whatever they can sell and the sales reps will sell the most of anything where they get the highest compensation. (e.g. Forget DB2, we make more money from Websphere and we don't have to deal with competing against Oracle, which we also sell... )

So I wouldn't worry about Arm architecture. .

But don't worry, IBM will screw it up... They always do...

Posted Anon because I still remember my serial number...

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Anonymous Coward

Re: This will not end well

This will not end well

Except for the Red Hat folks who have stock options.

BTW, what's IBM's upper age limit for employees who are not in the C-suite, 55?

Depends on your skill set. ;-)

But yes, IBM will continue to have resource actions against older workers all while cleaning house.

Nothing new here.

I wonder if Bob Young sold off all his shares long ago or if he kept some on after he left Red Hat...

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Anonymous Coward

> Well done Gini, it's another winner.

At the time of writing: 133 Up Votes to 1 (yes one) Down Vote: Ginny really does have an El Reg account!

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If IBM buys Redhat then what will happen to CentOS?

If IBM buys Redhat then what will happen to CentOS?

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Power is still a failure.

Power never managed to escape the stink of single-source. Yes, that's still a major issue - just look at all the teeth-gnashing that results from depending too much on Intel.

Has Power ever suffered from anything but "why bother"? Are there actual OS/software problems in the existing environment that cause problems? Buying RH might well fix them, but afaik, Power is unexceptional as just another one of the gazzilion arches that Linux supports.

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just curious why you think Power is so amazing.

to me, it's impressive the engineering that IBM can still bring to bear, but the results are distinctly meh. sure, they occasionally get out in front in some micro-architectural metric. but differences that matter to real systems?

the only thing I can think of is Power's tight integration with Nvidia - really just a political thing. And who cares much about it? It is at best a marginal benefit for a very niche market (gold-plated HPC clusters).

real SMT, sure, but show me a widespread use-case where that's critical.

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TVU
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Re: "they will buy a lot of talent."

"What happens over the next 12—24 months will be ... interesting. Usually the acquisition of a relatively young, limber outfit with modern product and service by one of the slow-witted traditional brontosaurs does not end well"

The acquisition of Sun Microsystems by Oracle comes to mind there. When Microsoft bought out GitHub, they made a promise to let it run independently and now IBM's given a similar pledge in respect of RedHat. They ought to abide by that promise because the alternatives are already out there in the form of Ubuntu and SUSE Linux Enterprise Server.

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Two words

Golden handcuffs.

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Re: You may have got it the wrong way around!

"IBM sold off the x86 hardware business to Lenovo and the Apple/Microsoft partnerships are not interested in alternatives to OSX and Windows."

Hmm,.. I recall Dell occasionally steps into the fray with Linux developer laptops and Windows-free desktops. Dell isn't as much of a direct competitor to IBM as others like HP, Oracle, etc, so a partnership where Dell boxes get shipped with IBM logos at a marked-up price to big IBM shops might work.

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Re: If IBM buys Redhat then what will happen to CentOS?

If IBM buys Redhat then what will happen to CentOS?

As long as IBM doesn't close-source RH stuff -- most of which they couldn't if they wanted to -- CentOS will still be able to do builds of it. The only thing RH can really enforce control over is the branding and documentation.

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Anonymous Coward

Re: "they will buy a lot of talent."

"I found that those with real talent that matched IBM needs are well looked after."

The problem is that when you have served your need you tend to get downsized as the expectation is that the cheaper offshore bodies can simply take over support etc after picking up the skills they need over a few months !!!

This 'Blue meets Red and assimilates' will be very interesting to watch and will need lots and lots of popcorn on hand !!!

:)

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Anonymous Coward

So exactly how is IBM going to tame employees that are used to going to work in shorts...

I'm more interested in what they'll be known as....

IBM is known as Big Blue, so after they assimilate Red Hat, will they be known as Big Purple Helmet?

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BINGO! After doing research on MANY CPU systems at the hardware level, that IBM Power-9 and the upcoming Power-10 are in fact MUCH MUCH BETTER than Intel XEON or AMD EPYC. IBM has royally screwed up the marketing of the power architecture which has MORE THREADS, MORE SPEED PER CORE (ideal for single thread linear tasks) and MORE access to larger block of memory!

All-in-all, Power-9 is a SUPERIOR CPU that is hobbled by some of the WORST MARKETING I have ever seen! A dual CPU Power-9 system if it had a HAL (Hardware Abstraction Layer) for Windows Server 2016/2019 would blow away any Intel/AMD system at the same price point. There would be NO CONTEST in terms of I/O's per second, TCP/IP V4/V6 communications latency, storage size ability and maximum local storage memory size for VM's.

The engineers to made the Power chips are SUPERB...but the marketing guys were dweebs! Just sign off the ENTIRE POWER architecture over to Dell which would the ONE DECENT COMPANY that could actually BE ABLE to market pro-level desktops, servers, laptops and tablets using such Power CPU's!!!

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Anonymous Coward

just curious why you think Power is so amazing.

Well all the high end systems I've worked on (with >64 cores/CPUs/procs/whatever) have been Power systems using AIX. Windows has never come close. Oracle is often the DB to host.

The only other high end box I've come across has been the mainframe. But then they are a different beast filling a different need (stupidly high I/O) for a particular market (FSS mainly).

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Anonymous Coward

Re: So exactly how is IBM going to tame employees that are used to going to work in shorts...

Purple rain will fall from that cloud...

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Wow bravo brutal and accurate. +1

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Re: So exactly how is IBM going to tame employees that are used to going to work in shorts...

IBM is not your father's IBM

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Re: just curious why you think Power is so amazing.

for one .. the RISC architecture offers more MIPS and cores than any CISC could ever dream of .

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Re: If IBM buys Redhat then what will happen to CentOS?

CentOS is still the open-source RH clone without the support ..

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Anonymous Coward

@TVU - Re: "they will buy a lot of talent."

Don't count on SLES!

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Anonymous Coward

@rcxb - Re: You may have got it the wrong way around!

Long time ago Dell has promised Microsoft not to increase demand for Linux. If they dare do the deal you suggest, something tells me their sales of Windows powered PC/laptops will suffer when MS licenses will suddenly become more expensive.

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Dude, stop shouting!

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Anonymous Coward

Hopefully IBM bollocks up systemd as part of this acquisition.

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"if it were me I would be calling my SUSE rep."

Having gone down the SUSE enterprise route and discovered how good SUSE support is (Hint: they ran away when it got too hard, so we ended up on Redhat), I'd be very wary of letting SUSE loose on anything more more important than a teasmaid.

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Re: So exactly how is IBM going to tame employees that are used to going to work in shorts...

I BM too but I don't brag about it.

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Anonymous Coward

Re: @rcxb - You may have got it the wrong way around!

"Long time ago Dell has promised Microsoft not to increase demand for Linux."

No, Dell found that Linux was far more expensive to create builds and drivers for and to provide support for than Windows, so it was never more than a niche option on laptops / desktops.

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Anonymous Coward

The only thing worse would have been Oracle buying it. I guess everyone will switch to Windows Server, Suse and Ubuntu instead.

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Anonymous Coward

IBM has been desperately trying to ignore Microsoft's success for many years now and have made themselves increasingly irrelevant in the process. This is an attempt to buy relevance, but it doesn't fix IBM being IBM. Linux being what it is, imo everyone will simply move from Red Hat to an alternative Linux rather than have to buy support from IBM.

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ROC

Beach office meetings?

Ain't no beaches in Raleigh, NC (except at a few lakes, and they're not very big as I recall).

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ROC

Not Just IBM Products Supported

I was supporting Oracle Application Server on Sun (then) Solaris servers when IBM (Global Services) laid me off 11 years ago, and they still kept a lot of such folks (along with WebLogic admins, and some of those in Brazil thought they could support OAS satisfactorily...) after that round. Their contract support would hire whatever skills the customer demanded. Dunno about now, but seems they still attempt to do something of that sort, if not so thoroughly...

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ROC

Oracle impact

Interesting to see how they continue, or not, with their RHEL-based Unbreakable Linux.

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