IBM Moves Closer to Clinching Red Hat


May. 10 2019, Published 1:31 p.m. ET

IBM pursuing over $171 billion in the hybrid cloud market

Early this month, federal regulators at the US Department of Justice cleared IBM (IBM) to proceed with its planned takeover of Red Hat (RHT). The Justice Department’s green light brings IBM closer to clinching an asset that it hopes will make it a stronger competitor in the hybrid cloud market and the cloud-computing industry overall.

According to Allied Market Research estimates, the global hybrid cloud market was valued at $36.2 billion in 2017 and is on track to reach $171.9 billion by 2025.

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IBM avoid federal regulatory holdup in Red Hat deal

In October last year, IBM announced its plan to purchase Red Hat for $34 billion. IBM appears lucky compared to its peers. Mobile operators T-Mobile (TMUS) and Sprint (S) have been waiting for more than a year for federal regulators to clear their $26 billion merger proposal.

In addition to clearance from American federal regulators, IBM still requires regulatory approvals in other jurisdictions before the transaction can close. IBM expects to close the transaction before the end of 2019.

IBM secured Vodafone cloud contract worth ~$1.4 billion

IBM has won multiyear cloud-computing contracts worth close to $1.4 billion from Vodafone (VOD) since it announced its plan to purchase Red Hat. In January, IBM announced that Vodafone had selected it to provide managed cloud services for eight years for $550 million. In the week that ended on May 3, IBM announced that Vodafone had tapped it to provide hybrid cloud services for its India unit, known as Vodafone Idea, over a five-year period. IBM didn’t disclose the financial terms of the Vodafone Idea contract, but India’s Economic Times reported that the deal was worth somewhere between $700 million and $800 million.


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