IBM Closes Red Hat Acquisition for $34 Billion

IBM said Tuesday morning it has closed its $34 billion acquisition of Red Hat, which was announced last October.

The pricey deal, which paid Red Hat owners a hefty premium of more than 60%, marks IBM CEO Ginni Rometty’s biggest bet yet in transforming her 108-year-old technology company.

In an interview Tuesday morning, she said some tech analysts have assumed the move to the cloud would lead to a “winner take all” scenario, where one giant platform—Amazon Web Services?—ends up with all the business.

But she believes the IBM-Red Hat combination will be better able to serve big companies that have legacy systems and will inevitably end up using multiple cloud systems, combined with on-premise systems.

“You need a hybrid cloud. You can’t rebuild everything,” she said. Big companies are increasingly coming to the recognition that “hybrid cloud is not a temporary destination, it is the destination.”

For Red Hat, the tie-up with IBM allows it to reach more companies, and to move deeper into those firms.

“If you look at our revenue growth, it has accelerated since the acquisition was announced,” said Red Hat CEO Jim Whitehurst. “We are already seeing confidence from our customers in the power of this in the future.”

Rometty believes the combined power of IBM and Red Hat will empower what she calls “the incumbent disrupter”—big companies that can drive change in their industries, rather than be disrupted by tech challengers.

Whitehurst will become part of the IBM management team. Rometty has committed to allowing Red Hat to run independently.