IBM acquiring Red Hat: How will it shake out?


Tom Paine




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Ginni Rometty, Chairman, President, and CEO of IBM, at right, 
and James M. Whitehurst, CEO of Red Hat, left
( From Press Release)










IBM should be nominated for being the most wasteful spender of capital in modern American business history.

GE would be in close competition.

Where has all the cash flow gone, just over the past 20 years?

Add up its M&A, R&D, CAPEX, and stock buybacks (I went through this exercise once), and its hard to see how what it has done has materially aided its overall, rapidly sliding marketcap, which is the real bottom line.

And the concern is history repeating itself. The real entrepreneurs will escape as soon as they're able to, IBM will eventually want to manipulate the organizational structure, people who have excelled under Red Hat will be buried under know-nothing IBM bosses, and the acquisition's energy will begin to atrophy. True, Red Hat's a more considerable asset than past acquisitions, and certainly IBM has smartened up and is effective in Linux / Open Source, but the track record is still there.

This acquisition doesn't give IBM domination over the cloud market. Certainly it will make it a bigger factor in the hybrid cloud market against Dell, maybe HP and some of the big consultancies. And IBM's position in public clouds may also improve to an extent, if nothing else from a spillover effect.

But Red Hat is such a big bet simply because IBM probably can't afford other acquisitions approaching that scale.

I've gathered the most compelling (and sometimes funny) online analyses of the deal that I've seen.

































































at 9:54 PM

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