IBM to acquire Red Hat

IBM to acquire North Carolina based Red Hat for $34 billions.

With the acquisition IBM plans to diversify from its technology hardware and consulting business into higher-margin products and services. The transaction is by far IBM’s biggest acquisition.  

 Red Hat charges fees to its corporate customers for custom features, maintenance and technical support, offering IBM a lucrative source of subscription revenue. Red Hat is one of the very few companies in the cloud computing sector that has both revenue growth and free cash flow.

IBM stock closed at $ 119.64, down 4% in Monday's trade. Red Hat is trading closed at $ 169.63.