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IBM acquires open-source software company Red Hat for $34 billion

The company now hopes to compete with Amazon and Microsoft in the cloud space.
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Less than a year after the deal was announced, IBM today officially acquired Red Hat for $34 billion.

This is the most expensive purchase in IBM’s 108-year history, the Wall Street Journal said.

On the other hand, Red Hat started as a Linux shop in 1993 and has grown along with the exponential use of the free and open-source kernel everywhere on the web.

With its business model unique among other Linux distributions: give away the operating system built on top of Linux for free – but charge for support services and training – Red Hat several years ago became the first Linux company to reach one billion dollars in annual revenues.

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In the meantime, the company had successfully branched into containers and the cloud.

And it’s that last thing that drew IBM’s attention, as this “original tech gangster” wants to remain relevant today – even if some, like the WSJ, are saying IBM might be too late to the game. Cloud computing is no doubt now dominated by Amazon and Microsoft, with Google getting in on the game pretty forcefully as of late.

But IBM CEO Ginni Rometty is going all-in on a hybrid cloud – combining plain cloud computing – i.e., putting all your data on somebody else’s servers – and keeping some what’s essential to the business in-house.

“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” Rommetty is quoted as saying on the IMB website, and adding: “The next 80 percent is about unlocking real business value and driving growth.”

And that’s the where the – astronomical – acquisition figure for Red Hat comes from. IBM have pledged to keep Red Hat’s DNA intact: “open source innovation legacy, scaling its vast technology portfolio and empowering its widespread developer community.”

Red Hat will operate as a distinct unit within IBM’s Hybrid Cloud, the company said.

Red Hat Linux OS has its little testing bed called Fedora – a free and open source OS widely used in developer and enthusiast Linux community.

The head of the project, Matthew Miller, today took the time to reassure all Fedora uses that the massive acquisition will in no way affect their favorite distribution.

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