Official: IBM to gobble Red Hat for $34bn – yes, the enterprise Linux biz IBM intends to acquire enterprise Linux maker Red Hat for $34bn (£27bn). Following rumors of a deal over the weekend, Big Blue announced the move here, in the past hour, and Red Hat's take is here. IBM made an offer of $190 per issued and outstanding Red Hat share, which was accepted: the current price stands at $116. …
Looking at those figures, it would make more sense for redhat to buy ibm.
Either you are missing sarcasm tags or you and I must be reading different numbers.
IBM $79b revenue vs RedHad $2.9b revenue, 3.6% the revenue of IBM.
IBM profits $5.8b (would have been $12.9b if they didn't have a one-off write-down) vs RedHat $259m, 4.4% of IBM's profits.
So IBM has 29 times more revenue and 22 times greater profits, and you think RedHat should have bought IBM?
"Just compare the share price of RH v IBM"
You would do better to look at the execution on the numbers - RedHat is not hitting it's targets and there are signs of trouble. These two businesses were both looking for a prop and the RedHat shareholders are getting out while the business is near it's peak.
doubtful. I think the 'culture' that produced things *LIKE* systemd aren't in line with IBM's way of doing things...
IBM really is about giving customers what they want. If customers DO NOT WANT systemd, they won't have to use it when IBM gets its way.
Think "sales and marketing" meets "engineering". The reality is that engineering needs sales/marketing, even if they're irritating as hell and drive the process too often, because it's the CUSTOMERS, and not the whims/wishes/unicorns-and-rainbows of the engineering team that get the development time assigned. no more "because we *FEEL* and people MUST accept it" (the attitude behind things *LIKE* systemd and gnome 3) is what I expect in the future... from IBM's hand in the mix.
After all - IBM has invested their future in Linux. No doubt they want THAT to continue.
The early risers (if not them then the after-hours guys) will suck up all the Red Hat stock they can and sell about the time the max buyout price is met. IBM.. might rise a bit at this news.
If the past is any indicator, all that will be left holding either companies stocks in a week will be the suckers who either believe their stock will increase in price or will be selling short.
But where do you invest your money now?
In the corporate lifecycle, small companies innovate and grow (and a lot fail). Medium sized companies grow and are usually acquired by lard-arse corporates. Lard arsed corporates have to keep buying medium sized companies to restore revenue lost by their lack of innovation and agility. And half of the money is made by buyouts, half by growth - to double up you need to back the buyout material.
Small companies can offer much better returns, but much higher risk. I'd have thought you need to invest in a portfolio of mid-sized tech companies, carefully avoiding the obvious dogs, and those whose business model you don't understand (because in that situations, you're probably right, and they don't have a sustainable business model).
But each to their own. You might want to invest again in large but sub-corporate businesses like IBM and RedHat. But pick carefully, because making money there is a lot harder - if the opportunity is obvious, then the big investors will already have bid the price too high to offer the small guy any return.
And something else to consider is the macro-economics: Rising US interest rates, trade wars, Brexit, the risk of a medium term equity bear market.
But where do you invest your money now?
Short duration treasuries. We are exiting "return on capital"- and entering "return of capital"- territory. The FED is raising and chaotic Brexit is looming, Volatility is growing, Indexes are up but underlying market stocks are "rotting" -> The odds of a 30% down month are basically getting better and better.
If one is getting bored and feeling lucky, there is:
BEAR x2 (or x3) certificates on an Index that is about to go "Splat!". Buy some on the coming retrace back up to moving average 200 days range for GDAXI or the FTSE, or a unicorn stock, or, whatever there is available from your local Fancy Lottery Ticket Pusher.
Just keep it small, there is risk of 100% capital loss on these things.
Quite a lot of the "OMG" moments rests on three assumptions:
- Red Hat is 100% brilliant and speckless
- IBM is beyond hope and unchangeable
- This is a hostile takeover
I beg to differ on all counts. Call me beyond hope myself because of my optimism, but I do think what IBM bought most is a way to run a business. RH is just too big to be borged into a failing giant without leavinf quite a substantial mark.
I beg to differ on all counts.
Note: I didn't downvote you, its a valid argument. I can understand why you think that, because I'm in the minority that think the IBM "bear" case is overdone. They've been cleaning their stables for some years now, and that means dropping quite a lot of low margin business, and seeing the topline shrink. That attracts a lot of criticism, although it is good business sense.
But I do beg to differ about the optimism, because, as my boss likes to quote, "culture eats strategy for breakfast". And (speaking as a strategist) that's 100% true, and 150% true when doing M&A. So the problem is that IBM have bought a business whose competencies and success factors differ from the IBM core. Its culture is radically different, and incompatible with IBM. Many of its best employees will be hostile to IBM. RedHat will be borged, and it will leave quite a mark. A bit like Shoemaker-Levi did on Jupiter. Likewise there will be lots of turbulence, but it won't endure, and at the end of it all the gas giant will be unchanged (just a bit poorer). And just like a gas giant, IBM can be considered a failed star.
At a premium of 63% I'm not going to blame Red Hat for taking that offer. That won't stop me feeling some level of annoyance when the inevitable collapse in product quality hits and we have to waste a year migrating everything off Blue Hat Enterprise Linux For The Hybrid Cloud Featuring Watson Cognitive Social Analytics
You will be (mostly) missed.
will sway my vote to Yes. That will fund my buying a Tesla Model 3 even after paying the CGT on the deal as long as I don't end up getting IBM stock which IMHO is worthless junk.
I shall have to wait for the offer details to come through but RH has been a juicy target for some years whih is why I bought a lot of stock in 2014 and more in 2016.
Large American corporation is moving very slowly due to large amounts of accreted lead.
American corporate sees dirigible, thinks "that's going much faster than we are."
American corporate buys dirigible and attaches it by cable so it can pull against the lead.
American corporate wonders why dirigible has stopped going anywhere.
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