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Red Hat Announces Mixed Earnings as IBM Gets Ready to Acquire It

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Dec. 18 2018, Updated 8:11 a.m. ET

Red Hat is an important acquisition for IBM

Red Hat (RHT) announced its earnings for the third quarter of 2018 yesterday. Its EPS of 51 cents per share came in below expectations. FactSet expected earnings of 56 cents per share for Red Hat. However, Red Hat’s revenues of $847 million beat expectations of $823 million. Red Hat stock was mostly unchanged after the market hours, as it is in the process of getting acquired by IBM (IBM).

A couple of months back, IBM had announced the acquisition of Red Hat for a valuation of $34 billion. The company expects this acquisition to complete by the latter half of next year. Red Hat is a strategic acquisition for IBM as it looks to compete in the cloud service market, especially the hybrid cloud market.

According to a report from Synergy Research Group for Q3 2018, Amazon (AMZN) continues to be the dominant player in the cloud services market with a share of 34%. Microsoft (MSFT), IBM, Google (GOOG), and Alibaba (BABA) are the other four players in this market after Amazon.

The report also mentioned that Amazon, Microsoft, Google, and Alibaba all gained market share in this market on a year-over-year basis. Only IBM lost market share. Thus, the Red Hat acquisition is important for IBM in the lucrative cloud market.

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