IBM announced the acquisition of Red Hat, the leading provider of open source software and services for enterprise customers. It focuses on cloud computing and Linux servers. The deal makes IBM the No. 1 hybrid cloud provider in an emerging $1 trillion growth market. IBM is trailing Amazon and Microsoft in cloud infrastructure business, and investment in cloud is one of IBM’s four key strategic imperatives along with social, mobile and analytics. The addition of Red Hat to IBM’s Hybrid Cloud division will enable it to accelerate businesses shifting to online-only operations and expands its cloud computing offerings. Red Hat’s revenue model complements IBM’s services offering it a lucrative source of subscription revenue.
In 2012, Red Hat became the first company to surpass $1 billion in revenue. Red Hat started as a distributor of a version of Linux 25 years ago and went public in 1999. Its Linux OS was developed as an alternative to proprietary software made by Microsoft. The Red Hat acquisition solidifies the trend on how traditional tech is re-inventing itself to meet changing business needs.