IBM Closes Red Hat Deal for $34 Billion

By George Leopold

July 10, 2019

Going all-in on its bet that enterprises are poised to move mission-critical workloads across hybrid clouds, IBM finally announced the closing of its blockbuster deal to acquire open source software leader Red Hat for $34 billion.

The transaction announced last October shook up the cutthroat hybrid cloud market. The lengthy gestation period for completing the debt-financed acquisition had some observers wondering whether the deal might fall through. IBM answered those doubts on Tuesday (July 9), saying it has closed the transaction by acquiring all common stock in Red Hat for $190 per share in cash.

The sheer size of the acquisition, which dwarfs previous deals as high as $4 billion, makes it a high-stakes gamble, particularly since analysts noted the IBM paid a hefty premium.

In a nod to an anxious open source software community, IBM said Red Hat would operate as an independent unit from its headquarters in Raleigh, NC. Jim Whitehurst, Red Hat’s president and CEO, will retain that title while joining IBM’s senior management team, reporting to IBM CEO Ginni Rometty.

The Red Hat acquisition moves IBM to the top ranks of the nascent hybrid cloud market. IBM is among a handful of cloud vendors seeking to chip away at Amazon Web Service’s seemingly unassailable lead in the cloud market by differentiating their services as users roll out multi-cloud strategies. Until now, Rometty argued, customers have focused on either renting IT infrastructure or moving only low-risk business applications to the cloud.

The next step, she added, is shifting the other 80 percent of core business applications to hybrid clouds, then figuring out how to manage them via multi-cloud platforms.

Rometty reiterated that strategy this week. The Red Hat acquisition “is going to allow us, and we’re the only one, [to deliver] a hybrid multi-cloud platform based on open source.”

“Businesses are starting the next chapter of their digital reinventions, modernizing infrastructure and moving mission-critical workloads across private clouds and multiple clouds from multiple vendors,” she added.

The steady shift to hybrid and multi-cloud deployments along with the integration of AI tools would allow users to move applications along with what IBM refers to as “refined” data and workloads across different platforms. IBM’s big bet on Linux-based open source tools like the Kubernetes cluster orchestrator is promoted as a way of easing the movement of data and apps across different environments.

The goal is giving cloud customers “the flexibility to build and deploy any app or workload, anywhere,” Whitehurst added. In the weeks before announcing the Red Hat deal, IBM released a multi-cloud manager designed to integrate workloads from Red Hat, AWS, Microsoft Azure and others running on Kubernetes, giving developers visibility into apps across different clusters and clouds.

The Red Hat deal also gives IBM a tool chest of open source technologies acquired by the former over the last several years, including the CoreOS application container platform and the Ansible IT automation and DevOps platform.

Meanwhile, Red Hat’s flagship Enterprise Linux, or RHEL, is expected to substantially boost the combined company’s global revenues in the coming year. Red Hat released the latest beta version of RHEL 7.7 in June.

Red Hat’s fiscal 2019 revenues totaling $3.4 billion were driven by healthy subscription revenue, especially cloud-native application development.

Its cloud business now accounts for one-quarter of IBM’s annual revenue. IBM said this week the Red Hat acquisition would add about two percentage points of compound annual revenue growth over the next five years.

IBM’s acquisition of Red Hat and Microsoft’s $7.5 billion deal last year to acquire the GitHub programming collaboration platform have heightened concerns about the future direction of the vibrant open source development community. Like Microsoft, IBM bent over backwards to reassure skeptics, noting that Red Hat would remain a vendor-neutral supplier of open source software while expanding existing partnerships with cloud rivals AWS, Microsoft Azure, Google Cloud and Alibaba.

“Red Hat has garnered a reputation of being an independent Switzerland software vendor,” Toni Sacconaghi, Bernstein senior tech analyst, told CNBC. “So the challenge for IBM is: How do you preserve that independence in the marketplace so [Red Hat] can continue to partner with other vendors, other cloud vendors, yet at the same time extract synergies, because IBM paid a significant premium for that asset?”

Hybrid IT infrastructure vendors predicted IBM’s investment will help scale Red Hat’s OpenShift and other cloud offerings. “Now that this partnership is finalized, we’ll begin to see more opportunity for hybrid IT, as companies that are hesitant to move their workloads to the public cloud will have the option to add an open source layer and manage their data across multiple clouds,” said Tim Beerman, CTO of managed services provider Ensono.

Nevertheless, IBM shares were down sharply following the close of the Red Hat deal.

–Doug Black contributed to this story.

Subscribe to HPCwire's Weekly Update!

Be the most informed person in the room! Stay ahead of the tech trends with industy updates delivered to you every week!

What’s New in HPC Research: Dark Matter, Arrhythmia, Sustainability & More

February 28, 2020

In this bimonthly feature, HPCwire highlights newly published research in the high-performance computing community and related domains. From parallel programming to exascale to quantum computing, the details are here. Read more…

By Oliver Peckham

Microsoft Announces General Availability of AMD-backed Azure HBv2 Instances for HPC

February 27, 2020

Nearly seven months after they were first announced, Microsoft Azure’s HPC-targeted HBv2 virtual machines (VMs) based on AMD second-generation Epyc processors are ready for primetime. The new VMs, which Azure claims of Read more…

By Staff report

Sequoia Decommissioned, Making Room for El Capitan

February 27, 2020

After eight years of service, Sequoia has been felled. Once the most powerful publicly ranked supercomputer in the world, Sequoia – hosted by Lawrence Livermore National Laboratory (LLNL) – has been decommissioned to Read more…

By Oliver Peckham

Quantum Bits: Q-Ctrl, D-Wave Start News Flow on Eve of APS March Meeting

February 27, 2020

The annual trickle of quantum computing news during the lead-up to next week’s APS March Meeting 2020 has begun. Yesterday D-Wave introduced a significant upgrade to its quantum portal and tool suite, Leap2. Today quantum computing start-up Q-Ctrl announced the beta release of its ‘professional-grade’ tool Boulder Opal software... Read more…

By John Russell

Blue Waters Supercomputer Helps Tackle Pandemic Flu Simulations

February 26, 2020

While not the novel coronavirus that is now sweeping across the world, the 2009 H1N1 flu pandemic (pH1N1) infected up to 21 percent of the global population and killed over 200,000 people. Now, a team of researchers from Read more…

By Staff report

AWS Solution Channel

Amazon FSx for Lustre Update: Persistent Storage for Long-Term, High-Performance Workloads

Last year I wrote about Amazon FSx for Lustre and told you how our customers can use it to create pebibyte-scale, highly parallel POSIX-compliant file systems that serve thousands of simultaneous clients driving millions of IOPS (Input/Output Operations per Second) with sub-millisecond latency. Read more…

IBM Accelerated Insights

Intelligent HPC – Keeping Hard Work at Bay(es)

Since the dawn of time, humans have looked for ways to make their lives easier. Over the centuries human ingenuity has given us inventions such as the wheel and simple machines – which help greatly with tasks that would otherwise be extremely laborious. Read more…

Micron Accelerator Bumps Up Memory Bandwidth

February 26, 2020

Deep learning accelerators based on chip architectures coupled with high-bandwidth memory are emerging to enable near real-time processing of machine learning algorithms. Memory chip specialist Micron Technology argues t Read more…

By George Leopold

Quantum Bits: Q-Ctrl, D-Wave Start News Flow on Eve of APS March Meeting

February 27, 2020

The annual trickle of quantum computing news during the lead-up to next week’s APS March Meeting 2020 has begun. Yesterday D-Wave introduced a significant upgrade to its quantum portal and tool suite, Leap2. Today quantum computing start-up Q-Ctrl announced the beta release of its ‘professional-grade’ tool Boulder Opal software... Read more…

By John Russell

Cray to Provide NOAA with Two AMD-Powered Supercomputers

February 24, 2020

The United States’ National Oceanic and Atmospheric Administration (NOAA) last week announced plans for a major refresh of its operational weather forecasting supercomputers, part of a 10-year, $505.2 million program, which will secure two HPE-Cray systems for NOAA’s National Weather Service to be fielded later this year and put into production in early 2022. Read more…

By Tiffany Trader

NOAA Lays Out Aggressive New AI Strategy

February 24, 2020

Roughly coincident with last week’s announcement of a planned tripling of its compute capacity, the National Oceanic and Atmospheric Administration issued an Read more…

By John Russell

New Supercomputer Cooling Method Saves Half-Million Gallons of Water at Sandia National Laboratories

February 24, 2020

A new cooling method for supercomputer systems is picking up steam – literally. After saving millions of gallons of water at a National Renewable Energy Laboratory (NREL) datacenter, this innovative approach, called... Read more…

By Oliver Peckham

University of Stuttgart Inaugurates ‘Hawk’ Supercomputer

February 20, 2020

This week, the new “Hawk” supercomputer was inaugurated in a ceremony at the High-Performance Computing Center of the University of Stuttgart (HLRS). Offici Read more…

By Staff report

US to Triple Its Supercomputing Capacity for Weather and Climate with Two New Crays

February 20, 2020

The blizzard of news around the race for weather and climate supercomputing leadership continues. Just three days after the UK announced a £1.2 billion plan to build the world’s largest weather and climate supercomputer, the U.S. National Oceanic and Atmospheric Administration... Read more…

By Oliver Peckham

Japan’s AIST Benchmarks Intel Optane; Cites Benefit for HPC and AI

February 19, 2020

Last April Intel released its Optane Data Center Persistent Memory Module (DCPMM) – byte addressable nonvolatile memory – to increase main memory capacity a Read more…

By John Russell

UK Announces £1.2 Billion Weather and Climate Supercomputer

February 19, 2020

While the planet is heating up, so is the race for global leadership in weather and climate computing. In a bombshell announcement, the UK government revealed p Read more…

By Oliver Peckham

Julia Programming’s Dramatic Rise in HPC and Elsewhere

January 14, 2020

Back in 2012 a paper by four computer scientists including Alan Edelman of MIT introduced Julia, A Fast Dynamic Language for Technical Computing. At the time, t Read more…

By John Russell

Cray, Fujitsu Both Bringing Fujitsu A64FX-based Supercomputers to Market in 2020

November 12, 2019

The number of top-tier HPC systems makers has shrunk due to a steady march of M&A activity, but there is increased diversity and choice of processing compon Read more…

By Tiffany Trader

SC19: IBM Changes Its HPC-AI Game Plan

November 25, 2019

It’s probably fair to say IBM is known for big bets. Summit supercomputer – a big win. Red Hat acquisition – looking like a big win. OpenPOWER and Power processors – jury’s out? At SC19, long-time IBMer Dave Turek sketched out a different kind of bet for Big Blue – a small ball strategy, if you’ll forgive the baseball analogy... Read more…

By John Russell

Intel Debuts New GPU – Ponte Vecchio – and Outlines Aspirations for oneAPI

November 17, 2019

Intel today revealed a few more details about its forthcoming Xe line of GPUs – the top SKU is named Ponte Vecchio and will be used in Aurora, the first plann Read more…

By John Russell

IBM Unveils Latest Achievements in AI Hardware

December 13, 2019

“The increased capabilities of contemporary AI models provide unprecedented recognition accuracy, but often at the expense of larger computational and energet Read more…

By Oliver Peckham

SC19: Welcome to Denver

November 17, 2019

A significant swath of the HPC community has come to Denver for SC19, which began today (Sunday) with a rich technical program. As is customary, the ribbon cutt Read more…

By Tiffany Trader

Fujitsu A64FX Supercomputer to Be Deployed at Nagoya University This Summer

February 3, 2020

Japanese tech giant Fujitsu announced today that it will supply Nagoya University Information Technology Center with the first commercial supercomputer powered Read more…

By Tiffany Trader

51,000 Cloud GPUs Converge to Power Neutrino Discovery at the South Pole

November 22, 2019

At the dead center of the South Pole, thousands of sensors spanning a cubic kilometer are buried thousands of meters beneath the ice. The sensors are part of Ic Read more…

By Oliver Peckham

Leading Solution Providers

SC 2019 Virtual Booth Video Tour

AMD
AMD
ASROCK RACK
ASROCK RACK
AWS
AWS
CEJN
CJEN
CRAY
CRAY
DDN
DDN
DELL EMC
DELL EMC
IBM
IBM
MELLANOX
MELLANOX
ONE STOP SYSTEMS
ONE STOP SYSTEMS
PANASAS
PANASAS
SIX NINES IT
SIX NINES IT
VERNE GLOBAL
VERNE GLOBAL
WEKAIO
WEKAIO

Jensen Huang’s SC19 – Fast Cars, a Strong Arm, and Aiming for the Cloud(s)

November 20, 2019

We’ve come to expect Nvidia CEO Jensen Huang’s annual SC keynote to contain stunning graphics and lively bravado (with plenty of examples) in support of GPU Read more…

By John Russell

Cray to Provide NOAA with Two AMD-Powered Supercomputers

February 24, 2020

The United States’ National Oceanic and Atmospheric Administration (NOAA) last week announced plans for a major refresh of its operational weather forecasting supercomputers, part of a 10-year, $505.2 million program, which will secure two HPE-Cray systems for NOAA’s National Weather Service to be fielded later this year and put into production in early 2022. Read more…

By Tiffany Trader

Top500: US Maintains Performance Lead; Arm Tops Green500

November 18, 2019

The 54th Top500, revealed today at SC19, is a familiar list: the U.S. Summit (ORNL) and Sierra (LLNL) machines, offering 148.6 and 94.6 petaflops respectively, Read more…

By Tiffany Trader

Azure Cloud First with AMD Epyc Rome Processors

November 6, 2019

At Ignite 2019 this week, Microsoft's Azure cloud team and AMD announced an expansion of their partnership that began in 2017 when Azure debuted Epyc-backed instances for storage workloads. The fourth-generation Azure D-series and E-series virtual machines previewed at the Rome launch in August are now generally available. Read more…

By Tiffany Trader

IBM Debuts IC922 Power Server for AI Inferencing and Data Management

January 28, 2020

IBM today launched a Power9-based inference server – the IC922 – that features up to six Nvidia T4 GPUs, PCIe Gen 4 and OpenCAPI connectivity, and can accom Read more…

By John Russell

Intel’s New Hyderabad Design Center Targets Exascale Era Technologies

December 3, 2019

Intel's Raja Koduri was in India this week to help launch a new 300,000 square foot design and engineering center in Hyderabad, which will focus on advanced com Read more…

By Tiffany Trader

In Memoriam: Steve Tuecke, Globus Co-founder

November 4, 2019

HPCwire is deeply saddened to report that Steve Tuecke, longtime scientist at Argonne National Lab and University of Chicago, has passed away at age 52. Tuecke Read more…

By Tiffany Trader

Microsoft Azure Adds Graphcore’s IPU

November 15, 2019

Graphcore, the U.K. AI chip developer, is expanding collaboration with Microsoft to offer its intelligent processing units on the Azure cloud, making Microsoft Read more…

By George Leopold

  • arrow
  • Click Here for More Headlines
  • arrow
Do NOT follow this link or you will be banned from the site!
Share This