IBM Cutting Jobs as Red Hat Deal Closing Nears


Jun. 12 2019, Published 2:21 p.m. ET

IBM to inherit over 13,000 workers from Red Hat

IBM (IBM) is planning to cut around 1,700 jobs, according to a report from CNBC. The job cut comes as IBM prepares to add Red Hat (RHT) to its corporate family. IBM last year agreed to purchase Red Hat, an open-source software company, for $34 billion. Red Hat had more than 13,000 employees at the end of February this year. IBM itself has more than 340,000 employees worldwide. Therefore, IBM’s headcount is set to swell once the Red Hat deal closes. The deal is expected to close before the end of the year.

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IBM told CNBC that the job cuts are part of the company repositioning its teams to align them with its focus on high-value segments of the information technology market. Those high-value segments, as IBM has shown, include selling cloud computing services, a space currently dominated by Amazon (AMZN) and Microsoft (MSFT).

IBM-Red Hat deal triggers cloud deals

In a sign that the job cuts aren’t about cutting costs so much as realigning teams, IBM has openings for nearly 8,000 positions. According to IBM, it’s hiring aggressively in critical areas such as cloud. The addition of Red Hat is expected to supercharge IBM’s cloud computing business as the company sets its sights on high-growth markets. The global cloud market was valued at $182.4 billion in 2018 and is forecast to top $331 billion by 2022, according to Gartner estimates.

In what appears to show that IBM competitors in the cloud market are closely watching its moves, there have been several cloud deals since it announced the Red Hat deal. Microsoft last month teamed up with Sony (SNE) on a program aimed at making its cloud platform more attractive for game developers. Google (GOOGL) recently announced that it is buying data analytics specialist Looker for $2.6 billion to strengthen its cloud business.


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