What’s Worth $34B? IBM Gets OK in Europe for Acquisition of Red Hat
IBM’s acquisition of open-source software maker Red Hat cleared the hurdle of approval from European regulators Thursday because it raised no concerns about competition, according to the European Commission.
The $34 billion deal, which the companies plan on closing in the second half of 2019, drew attention when it was announced last fall for being seen as the biggest software acquisition of all time. The emphasis of the acquisition was on a making IBM (NYSE: IBM) more competitive with bigger cloud players such as Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Google (NASDAQ: GOOGL), as Xconomy reported at the time.
It also aimed at helping Armonk, NY-based IBM better serve businesses in a “hybrid cloud” environment, an approach to IT that uses on-site hardware, remote servers managed by a third party, and “public” cloud servers run on remote, virtualized computing resources. One factor the European Commission considered was whether the deal would give enterprise consumers more options when seeking out open hybrid cloud systems—the regulators thought it would.
While it is a blockbuster deal that could bolster IBM’s bottom line, especially in terms of hybrid cloud, Xconomy reported in November that some executives and investors wonder whether buying Raleigh, NC-based Red Hat (NYSE: RHT) will make the impact that the high price tag might suggest.
That includes questions about whether a deal focused more on hybrid cloud than on building cloud-native apps might not be forward thinking enough, and whether the price tag is worth the few billion in annual revenue from Red Hat—at least in the short term. Read more of Xconomy’s analysis of the deal here.
The US Department of Justice gave the companies the go-ahead in May without any conditions, according to IBM.