This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
The deal was labelled a ‘game-changer’ by IBM’s Chairman and CEO Ginni Rometty, with the acquisition helping the IT company to become one of the world’s largest hybrid cloud providers.
IBM: the next chapter of the cloud
The acquisition will allow IBM to accelerate hybrid multi-cloud adoption, helping its clients to create cloud-native business applications, increase portability and improve overall security of data across multiple public and private cloud.
‘Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,’ Rometty said. ‘The next 80 percent is about unlocking real business value and driving growth.’
‘This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales,’ she added.
Prior to the deal, IBM and Red Hat were engaged in a partnership that spanned 20 years, with the two companies collaborating with to create hybrid cloud solutions for its customers.
‘Open source is the default choice for modern IT solutions, and I'm incredibly proud of the role Red Hat has played in making that a reality in the enterprise,’ Jim Whitehurst, President and CEO of Red Hat said.
‘Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience – all while preserving our unique culture and unwavering commitment to open source innovation.’
IBM sees share price decline
IBM has seen its share price fall by around 26% from a high of 169p in January this year, with the stock hovering at around 125p on Monday.
the company will hope that the acquisition will prompt its share price to rise, with the deal ‘reinforcing IBM’s high-value model’ and helping it to accelerate revenue growth and a growing dividend for its shareholders, the company said.
The acquisition remains subject to Red Hat shareholders and regulatory approvals, with the deal expected to close in the second half of 2019.