Pondering Redhat’s future with IBM

I woke up yesterday morning with a shocker of a news. IBM announced that they were buying Redhat for USD34 billion. Never in my mind that Redhat would sell but I guess that USD190.00 per share was too tempting. Redhat (RHT) was trading at USD116.68 on the previous Friday’s close.

Redhat is one of my favourite technology companies. I love their Linux development and progress, and I use a lot of Fedora and CentOS in my hobbies. I started with Redhat back in 2000, when I became obsessed to get my RHCE (Redhat Certified Engineer). I recalled on almost every weekend (Saturday and Sunday) back in 2002 when I was in the office, learning Redhat, and hacking scripts to be really good at it. I got certified with RHCE 4 with a 96% passing mark, and I was very proud of my certification.

One of my regrets was not joining Redhat in 2006. I was offered the job as an SE by Josep Garcia, and the very first position in Malaysia. Instead, I took up the Hitachi Data Systems job to helm the project implementation and delivery for the Shell GUSto project. It might have turned out differently if I did.

The IBM acquisition of Redhat left a poignant feeling in me. In many ways, Redhat has been the shining star of Linux. They are the only significant one left leading the charge of open source. They are the largest contributors to the Openstack projects and continue to support the project strongly whilst early protagonists like HPE, Cisco and Intel have reduced their support. They are of course, the perennial top 3 contributors to the Linux kernel since the very early days. And Redhat continues to contribute to projects such as containers and Kubernetes and made that commitment deeper with their recent acquisition of CoreOS a few months back.

But recently, their revenue train had challenges. In their latest Q2 call, their revenue did not meet the street’s expectation but did well with their EPS number. Shareholders should be happy because Redhat’s outlook has been very positive so far up to this point. Even with this little stumble, the Redhat momentum remained strong. So what gives?

IBM, on the other hand, has been a nonplussed tech giant. Their growth engines have been disappointing. They have led in AI, blockchain, analytics, and more cutting edge innovations than any other company in the world. Watson, their analytics and AI platform was, in my books, the one technology that lifted IBM out of the quagmire, until the news that Watson gave unsafe recommendations for treating cancer. That deflated IBM and my outlook of them went out with their AI hot air. And of course, I follow their revenue numbers. Their Q3 was a miss, despite the few recent sparkles I saw in the past 3 years. I guess it is hard to position the aging IBM supertanker in the right course.

I tweeted yesterday about this IBM and Redhat marriage. It’s a win for both from my point of view. I was being polite.

Subliminally, I knew IBM was desperate even if it didn’t really bubbled up until just now. All their revenue engines have been sputtering and the Redhat acquisition is the lifeline they needed. Redhat really doesn’t need to take up the IBM offer but the challenges appeasing the shareholders are getting more and more difficult. I guess 1+1 makes 2.

Now, what happens next? Redhat, as we were informed, will remain an independent pillar for IBM. That is key. IBM cannot lay its grubby hands on Redhat and ruin a well-oiled company because history has shown us IBM’s record of acquisitions. Redhat must resist IBM’s future advances to tinker and meddle, and ensure that the Linux ecosystem continues to grow and thrive. The same goes for the other projects like Openstack and containers.

There is a Chinese saying : 生米煮成熟饭, which literally means “The Rice is Cooked”. The IBM-Redhat deal is done. We just have to see how it will pan out after the dust has settled. I remain steadfast that Redhat doesn’t need to do this, but I hope there are heady days ahead.

Note: Also check out GestaltIT discussion about the IBM acquisition of Redhat.