IBM Closes Acquisition of Red Hat for $34B • Hacker News Board

Re: IBM Closes Acquisition of Red Hat for $34B

#111

Post by NikolaNovak » Tue, Jul 09, 2019, 3:18 PM UTC

DevX101 wrote: post #31

calgoo wrote: post #28

I really hope IBM can keep their fingers out of Red Hat, if not, it does not matter how many promises they make, they will run it into the ground. If they actually manage to keep away, and let their cloud business grow without interference; they actually have a chance to grab a big piece of the cloud business.

You don't spend $34B to not interfere.

For what it may be worth: I joined in 2003 the part of IBM that was essentially the very-recent acquisition of PWC Consulting. I believe that was ~30k [1] employees ingested (compared to Redhat's Now, my limited view and perspective is as a bottoms-up techie grunt during this period, but my very personal observations are:

1. Absolutely, PWC got assimilated over time. However:

2. For the first 5 years, culture in my part of BCS was 90+% PWC culture. Perceptible (again, from bottoms-up perspective, I'm sure lots more was brewing in the background) changes started creeping around 2007-2010 mark.

3. Today, 17 years later, I would claim it's a hybrid mix. We are clearly not the same as we were during PWC private-ownership, partnership-structure - no public company can be; but we are still different culturally than rest of the IBM.

4. Perhaps most convincingly, I'd say 70-80% of people I knew in 2003 in my part of IBM, who were originally from PWC, stayed for ~15 years. When many of them moved on ~~2017, it was for a very specific and very different reason. A whole bunch still remain though, including much of the senior management / partner / executive structure (my direct peers and management are all still ex-PWC).

Again, FWIW - there will be a myriad experiences and stories in this complex picture, but that's been my experience.

1: https://www-03.ibm.com/press/us/en/pressrelease/491.wss

Re: IBM Closes Acquisition of Red Hat for $34B

#112

Post by [deleted] » Tue, Jul 09, 2019, 3:22 PM UTC

bloopernova wrote: post #68

bmicklea wrote: post #34

Earlier quoted context omitted.

I respectfully disagree - I'm a Red Hatter so you can take that for what it's worth. To me the 34B buys IBM the real estate in the open hybrid cloud market which Red Hat has built up in the last 5 years. That is part of a large and rapidly growing market. If IBM interferes with Red Hat they will likely squander the value of what we've built. If they foster what Red Hat did to win that critical ground then their 34B c…

I certainly don't want to argue or appear confrontational, but wanted to ask you this: Have there ever been any situations where the acquisition of a smaller company by a larger one has resulted in the smaller company remaining independent? Or has there been any positives for companies like Red Hat when they get bought? Usually I hear or read the positive-yet-bland press release talking about how wonderful this is, a…

[deleted]

Re: IBM Closes Acquisition of Red Hat for $34B

#113

Post by infraCode » Tue, Jul 09, 2019, 3:24 PM UTC

i'm just a lurker and i have a lot of respects for this community but why some of you acting like somehow RedHat is not going to make money anymore after IBM bought them.

RedHat already make billion doing what they do now. Why would that change? IBM is basically a consulting company and adding RedHat is more than a perfect match since RedHat main business is selling supports.

this thread just wow.

Re: IBM Closes Acquisition of Red Hat for $34B

#114

Post by vikramkr » Tue, Jul 09, 2019, 3:26 PM UTC

tontonius wrote: post #84

So IBM buys Red Hat for $34B, of which $20B are borrowed monies. The debt is priced at 1.05 percentage points above Treasury yield rate [1] which would be somewhere around 3.5% which puts interest on bond debt at ~$700m every year. Now consider that Red Hat had a net income of $433m. Even if they reach $500 this year, Big Blue will still be $200m short, every year. At the moment, IBM is trading down at -0.5% on an ot…

That assumes zero growth, I think ibm obviously expects revenues and income to grow from red hat over time which would justify the purchase price. Whether or not that's warranted it's a different story, but the entirely of the price justification is probably not synergies - the cloud sector is growing pretty fast in general

Re: IBM Closes Acquisition of Red Hat for $34B

#115

Post by sailingparrot » Tue, Jul 09, 2019, 3:27 PM UTC

tontonius wrote: post #84

So IBM buys Red Hat for $34B, of which $20B are borrowed monies. The debt is priced at 1.05 percentage points above Treasury yield rate [1] which would be somewhere around 3.5% which puts interest on bond debt at ~$700m every year. Now consider that Red Hat had a net income of $433m. Even if they reach $500 this year, Big Blue will still be $200m short, every year. At the moment, IBM is trading down at -0.5% on an ot…

> Just from these numbers we can conclude that IBM is seeing some pretty significant synergies in the purchase that the market isn't.

Or there was basically very little chance that the acquisition wouldn't go through, and since we have known about it for months, it is already priced in the current stock value of IBM, so today's trading would be mostly unrelated and not representative of what investors think about the purchase.

Re: IBM Closes Acquisition of Red Hat for $34B

#116

Post by tictoc » Tue, Jul 09, 2019, 3:28 PM UTC

The title looks wrong.

Re: IBM Closes Acquisition of Red Hat for $34B

#117

Post by vikramkr » Tue, Jul 09, 2019, 3:29 PM UTC

asdf21 wrote: post #94

duxup wrote: post #71

Earlier quoted context omitted.

IBM has been stumbling around trying to find its feet again for a while now. It seems possible that despite the advantages you cite that IBM won't know how to use them. Word from the inside is that IBM's own "sales machine" selling Watson for what it really wasn't ... was a great deal of the problem with Watson. The skepticism about IBM is rooted in their recent history.

Yeah, whatever happened to Watson? I haven't really heard much in a couple years now..

Most healthcare professionals I've spoken to consider it an absolute joke, it's apparently a bit of a laughingstock compared to its grand claims of diagnosing all the cancers

Re: IBM Closes Acquisition of Red Hat for $34B

#118

Post by GuiA » Tue, Jul 09, 2019, 3:32 PM UTC

topkai22 wrote: post #99

jackhack wrote: post #75

Earlier quoted context omitted.

I usually put it this way: "Name one company that was better after a merger." I've yet to find any affirmative answer. It's good to have hope, but it's not good to be unrealistic.

Pixar / Disney Marvel / Disney Facebook / Instagram EBay/PayPal Exxon/Mobil Massive numbers of banking / pharma/ industrial mergers. I will agree though that I can't think of a tech sector merger at this scale that worked out really well. They seem to work best at the sub $2B level. Although LinkedIn/Microsoft is looking OK.

Are we talking about financial success, or making quality products? I get that shareholders care about the former, but as hackers we should care about the latter.

Pixar movies have become crappy sequels made to sell toys. Instagram has become an ad infested product that tries to have every feature, resulting in a confused mess. Exxon/Mobil is one of the worst things that could have happened to the planet.

eBay/PayPal is a good one that made product sense.

I’m not big enough of a Marvel fan to judge that one.

Re: IBM Closes Acquisition of Red Hat for $34B

#119

Post by bklyn11201 » Tue, Jul 09, 2019, 3:32 PM UTC

lonelappde wrote: post #45

brianwawok wrote: post #25

Earlier quoted context omitted.

Is it less risky? Say a decent chunk of your portfolio in a single stock? And something weird happens during due diligence , not only is the acquisition over - the stock will bomb. Not sure how often acquisitions fall through after being announced, I assume very low. But still seems similar or higher risk then a stock fund.

Redhat has a 20year history as a public company, it's very unlikely that there'd be a big surprise in due diligence.

I think the worry was less due diligence and more a weird anti-trust case from USA, China, or Europe.

Re: IBM Closes Acquisition of Red Hat for $34B

#120

Post by topkai22 » Tue, Jul 09, 2019, 3:33 PM UTC

ScottFree wrote: post #109

topkai22 wrote: post #99

Earlier quoted context omitted.

Pixar / Disney Marvel / Disney Facebook / Instagram EBay/PayPal Exxon/Mobil Massive numbers of banking / pharma/ industrial mergers. I will agree though that I can't think of a tech sector merger at this scale that worked out really well. They seem to work best at the sub $2B level. Although LinkedIn/Microsoft is looking OK.

What you don't hear about are the dozens of companies Disney has acquired then shut down over the years. Playdom. Tapulous. Junction Point Studios. Fall line Studios. Wideload Games. Propaganda Games. Black Rock Studios.

Or the tragedy of LucasArts, which is one reason I left LucasFilm off the list.

Disney and gaming seem like a match made in heaven, but for some reason it seems like the mouse struggles to perform in that market compared to its unqualified successes in Movies, TV, and theme parks.