As per the terms of the transaction, Jim Whitehurst, Red Hat’s chief executive officer, will join IBM’s leadership team. By acquiring Red Hat, IBM intends to strengthen its foothold in the cloud computing market and return to the growth path. Of late, profitability has been affected by the ongoing slump in the PC market and IBM’s overdependence on its low-margin core business.
As per the terms of the transaction, Jim Whitehurst, Red Hat’s chief executive officer, will join IBM’s leadership team
On completion of the transaction, Red Hat will become a part of the Big Blue’s Hybrid Cloud division and will start contributing to cash flow and gross margin within twelve months. Red Hat’s software development prowess will give IBM the strength to compete effectively with Amazon (AMZN) and Microsoft (MSFT) in the areas of cybersecurity and cloud computing.
Strong subscription growth drives up Red Hat’s Q3 earnings
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In the third quarter, Red Hat’s earnings and revenues rose sharply aided by a further strong subscription growth and stable demand for its hybrid cloud technology solutions.
Continuing the turnaround that started a few months ago, Red Hat shares maintained the uptrend this week and traded slightly higher Wednesday. IBM’s stock, which has been struggling to recover from the recent multi-year lows, traded broadly flat throughout the session.