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. …

Does this mean Red Hat Linux coding will all be done in India hereafter? Does Red Hat have an exciting fleet of jets and helicopters? I can't see the draw for Mz. Rometti....

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Anonymous Coward

Perhaps this was the reason Torvalds was muzzled?

IBM & RH were getting close to a deal and any bad news WRT the kernel might affect share prices etc.

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Re: Perhaps this was the reason Torvalds was muzzled?

Perhaps this was the reason Torvalds was muzzled?

IBM & RH were getting close to a deal and any bad news WRT the kernel might affect share prices etc.

Except he works for Linux Foudation, not RedHat.

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Re: Perhaps this was the reason Torvalds was muzzled?

Except he works for Linux Foudation, not RedHat.

Have noticed my typo too late to fix, and disappointed it wasn't at least "Linux Foudnation". Purveyors of open source plov.

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Anonymous Coward

If IBM throws the Tivoli moniker in...

... You pretty much know RedHat is getting screwed up beyond any possible repair.

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This seems like a good move. But I wonder why IBM waited till now to acquire Red Hat. My own belief is that IBM should have acquired Red Hat years ago. $34 billion is a lot of money to pay. It will be interesting to see what happens in any case.

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Equally, I’ve previously wondered why Oracle didn’t buy Red Hat given they already use EL as the basis for their own spin of Linux?

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> My own belief is that IBM should have acquired Red Hat years ago. $34 billion is a lot of money to pay.

IBM is going write off only $7 billions so everything else it will be "paid| in just shares operations.

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tfb
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I presume they were waiting to see what happened to Solaris. When Oracle bought Sun (presumably the only other company who might have bought them was IBM) there were really three enterprise unixoid platforms: Solaris, AIX and RHEL (there were some smaller ones and some which were clearly dying like HPUX). It seemed likely at the time, but not yet certain, that Solaris was going to die (I worked for Sun at the time this happened and that was my opinion anyway). If Solaris did die, then if one company owned both AIX and RHEL then that company would own the enterprise unixoid market. If Solaris didn't die on the other hand then RHEL would be a lot less valuable to IBM as there would be meaningful competition. So, obviously, they waited to see what would happen.

Well, Solaris is perhaps not technically quite dead yet but certainly is moribund, and IBM now owns both AIX and RHEL & hence the enterprise unixoid market. As an interesting side-note, unless Oracle can keep Solaris on life-support this means that IBM own all-but own Oracle's OS as well ('Oracle Linux' is RHEL with, optionally, some of their own additions to the kernel).

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TVU
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"Equally, I’ve previously wondered why Oracle didn’t buy Red Hat given they already use EL as the basis for their own spin of Linux?"

I'm rather glad they didn't for they would have eviscerated it and closed sourced everything.

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How do you say "Red Hat" in Hindi??

You're going to be hearing that phrase a lot in the next couple years, as IBM moves huge chunks of RH's support and development teams to India or Bangladesh.

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Re: How do you say "Red Hat" in Hindi??

Hello)

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Big Brother

The next shoe drops...

It seems the Blue Bloods have now begun taking over lynchpins in open tech developments as another step in their plans to tighten global control over everything. Microsoft bought GitHub yesterday, IBM buys Red Hat today... Who's next?

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Re: The next shoe drops...

Who's next?

Any bets that Apple will be buying something soon?

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Anonymous Coward

Re: The next shoe drops...

>Any bets that Apple will be buying something soon?

Fyffes?

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Re: The next shoe drops...

Ford motor company

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Holmes

Wait...wait...WAIT!

According to everything I've been reading--for YEARS--from the world's second-biggest blow-hard and grandstander from South Africa, is that Ubuntu is more profitable, much more beloved, head-and-shoulders bigger, and much more important than Red Hat.

IBM, you just don't pay attention to the really important stuff. You don't listen to the REALLY VERY IMPORTANT PEOPLE. If you want to know how important this person is, just ask him.

You could have had Ubuntu.

Jerks.

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Anonymous Coward

Re: Wait...wait...WAIT!

> You could have had Ubuntu.

That would have been preferable. Both Canonical and IBM deserve a long slow slide into irrelevance.

Now it looks like Canonical will win, from just being the last one standing.

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Anonymous Coward

Re: Wait...wait...WAIT!

Now it looks like Canonical will win, from just being the last one standing.

You're forgetting about SUSE. RedHat-like, yet independent from it. Has or is affiliated with similar server products you would run on those systems, and even originated some of those products/projects you would now associate with RH or Ubuntu. Has more reputation as a "server" distribution than Ubuntu does.

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Anonymous Coward

Re: Wait...wait...WAIT!

> You're forgetting about SUSE.

Not really. It's just not in the running.

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Anonymous Coward

Borrowing $ at low rates

IBM must be borrowing a lot of cash to fund the acquisition. At last count it had about $12B in the bank... https://www.marketwatch.com/investing/stock/ibm/financials/balance-sheet.

Unlike everyone else - https://www.thestreet.com/story/14513643/1/apple-microsoft-google-are-sitting-on-crazy-amounts-of-cash.html

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Re: Borrowing $ at low rates

The acquisition will increase IBM's leverage by at least 50% - one source says it will nearly double - JPM will be providing financing.

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Finally

I never could get Debian running correctly on my Selectric. Hopefully RH will install OK.

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Linux

For shame.

Just had my old Nan in tears on the phone demanding that Red Hat is removed from her PC and be replaced by Windows 10.

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Boffin

Let’s face facts.

Watson, how do you flush a good tech company down the bog?

Have it taken over by IBM.

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Anonymous Coward

It'll be great.

RHEL on z-series and i-series. The perfect base for more efficient cloud provision.

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kill exadata

Finally, now IBM can starve out the leech Oracle Linux and kill exadata for good. FTW

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Angel

Re: kill exadata

[Freddellmeister] "Finally, now IBM can starve out the leech Oracle Linux and kill exadata for good. FTW"

Or... finally, Oracle can kill Oracle Linux and move ExaData to Solaris 11, with it's GNU User Land that feels like Linux.

Oracle offered Intel based Solaris 11 Storage Heads and SPARC Solaris 11 SuperCluster for a very long time!

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Nutanix

Going to be interesting to see what Nutanix does now, as I believe they use centos as their base system. I wonder if they will fork centos and go from there.

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Bronze badge

Blue is the new Red ...

How long before some Marketing dick comes up with the ruse to bust his bonus by re-branding everything?

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Anonymous Coward

Re: Blue is the new Red ...

Break out the Bluewash?

https://www.reddit.com/r/IBM/comments/45odtc/what_is_ibm_bluewash/

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Over-paid ...

Looking at the Red Hat numbers, I would not want to be an existing IBM share-holder this morning; both companies missing market expectations and in need of each other to get out of the rut.

It is going to take a lot of effort to make that 63% premium pay-off. If it does not pay-off pretty quickly, the existing RedHat leadership with gone in 18 months.

P.S.

Apparently this is going to be financed by a mixture of cash and debt - increasing IBM's existing debt by nearly 50%. Possible credit rating downgrade on the way?

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Re: Over-paid ...

Looking at the Red Hat numbers, I would not want to be an existing IBM share-holder this morning; both companies missing market expectations and in need of each other to get out of the rut.

RH missing market expectations? RH had made reasonable projections, and in fact *exceeded* those projections. They didn't over-estimate and then fail to meet their targets. The market only thinks RH didn't "meet expectations" because they didn't exceed their projections by the percentage the market thought they should have.

Something's wrong when you do *more* than you said you would, and people *still* complain you didn't do enough.

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Re: Over-paid ...

"RH missing market expectations? RH had made reasonable projections, and in fact *exceeded* those projections"

No it isn't - it is missing its numbers.

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Goodbye...

...Red Hat.

No doubt IBM will scare off all the decent employees that make it what it is.

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RH employees will start to jump ship

As soon as they have a minimum of experience with the terrible IBM change management processes, the many layers of bureocracy and management involved and the zero or negative value they add to anything at all.

IBM is a shinking ship, the only question being how long it will take to happen. Anyone thinkin RH has any future other than languish and disappear under IBM management is dellusional. Or a IBM stock owner.

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Product lines EoL ...

What get's the chop because it either does not fit in with the Hybrid-Cloud model, or does not generate sufficient margin?

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Trollface

A ship carrying red paint collided with a ship carrying blue paint.

The survivors were marooned.

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Facepalm

"I'll give you $70 to get on this sinking ship!"

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Holmes

But *Why* did they buy them?

I'm still trying to figure out "why" they bought Red hat.

The only thing my not insignificant google trawling can find me is that Red Hat sell to the likes of Microsoft and google - now, that *is* interesting. IBM seem to be saying that they can't compete directly but they will sell upwards to their overlords - no ?

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Anonymous Coward

Re: But *Why* did they buy them?

Maybe they bought them to stop Oracle buying them?

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Anonymous Coward

Re: But *Why* did they buy them?

As far as I can tell, it is be part of IBM's cloud (or hybrid cloud) strategy. RH have become/are becoming increasingly successful in this arena.

If I was being cynical, I would also say that it will enable IBM to put the RH brand and appropriate open source soundbites on the table for deal-making and sales with or without the RH workforce and philosophy. Also, RH's subscription-base must figure greatly here - a list of perfect customers ripe for "upselling".

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Re: But *Why* did they buy them?

I'm fairly convinced that it's because of who uses RedHat. Certainly a lot of financial institutions do, they're in the market for commercial support (the OS cost itself is irrelevant). You can tell this by looking at the prices RedHat were charging for RedHat MRG - beloved by the high speed share traders. To say eye-watering, PER ANNUM too, is an understatement. You'd have to have got deep pockets before such prices became ignorable.

IBM is a business services company that just happens to make hardware and write OSes. RedHat has a lot of customers interested in business services. The ones I think who will be kicking themselves are Hewlett Packard (or whatever they're called these days).

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This post has been deleted by its author

tfb
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Re: But *Why* did they buy them?

Because AIX and RHEL are the two remaining enterprise unixoid platforms (Solaris & HPUX are moribund and the other players are pretty small). Now both of those are owned by IBM: they now own the enterprise unixoid market.

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Re: But *Why* did they buy them?

"I'm still trying to figure out "why" they bought Red hat."

What they say? It somehow helps them with cloud. Doesn't sound like much money there - certainly not enough to justify the significant increase in debt (~US$17B).

What could it be then? Well RedHat pushed up support prices and their customers didn't squeal much. A lot of those big enterprise customers moved from expensive hardware/expensive OS support over the last ten years to x86 with much cheaper OS support so there's plenty of scope for squeezing more.

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Howewer MS is going in opposite direction ..

Instead investing in what is up (clouds) is doing the same but under water (look on they underwater DCs)

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This post has been deleted by a moderator

Bronze badge

Ultraviolet Hat

With bags of cash, might be a lot this happening in the next. Fuck, they're lethal as well, might be the t-shirts that's the secret as well. #productivity

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