IBM to buy Red Hat as it seeks higher-margin business
The deal underscores IBM chief Ginni Rometty's efforts to expand the company's subscription-based software offerings, as it faces slowing software sales
New York — IBM said on Sunday it had agreed to acquire US software company Red Hat for $34bn, including debt, as it seeks to diversify its technology hardware and consulting business into higher-margin products and services. The transaction is by far IBM's biggest acquisition. It underscores IBM CEO Ginni Rometty's efforts to expand the company's subscription-based software offerings, as it faces slowing software sales and waning demand for mainframe servers. IBM, which has a market capitalisation of $114bn, will pay $190 per share in cash for Red Hat, a 63% premium to Friday's closing share price. Founded in 1993, Red Hat specialises in Linux operating systems, the most popular type of open-source software, which was developed as an alternative to proprietary software made by Microsoft. Red Hat charges fees to its corporate customers for custom features, maintenance and technical support, offering IBM a lucrative source of subscription revenue. Red Hat is one of the very few compan...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.