IBM closes $34 billion Red Hat acquisition: Now it’s time to deliver

IBM has closed its $34 billion acquisition of Red Hat, vowed to keep its new unit independent, deliver innovative hybrid cloud stacks and grow.

Here are the key items to watch now that Red Hat is part of IBM. Can Red Hat growth continue and grow IBM overall? IBM’s cloud revenue is 25% of total sales on a run rate of $19 billion, but Red Hat is small with fiscal 2019 sales of $3.4 billion, up 15% from a year ago.

Although Red Hat’s revenue profile is fairly substantial with strong levels of profitability, we note that purchase accounting treatment of the target company’s deferred revenue will make IBM unable recognize a meaningful portion of Red Hat’s deferred revenue as it converts to actual revenue; this is while IBM will have to incur 100% of Red Hat’s operating expense.

Will Red Hat truly remain neutral and independent? IBM buying Red Hat is probably the best outcome if you believe in open source.

“Independence is essential to ensuring Red Hat partners will have an equal shot. Red Hat and IBM feels strongly about that,” he said.

Is IBM-Red Hat a multi-cloud point guard? IBM reiterated that with Red Hat it will continue to expand partnerships with all the leading cloud providers such as Amazon Web Services, Microsoft Azure, Google Cloud and Alibaba.

Will developers stick with Red Hat? It is worth noting that Red Hat and IBM spent a lot of digital ink on what the deal means for developers.

This article was summarized automatically with AI / Article-Σ ™/ BuildR BOT™.

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