So far, IBM is getting its money’s worth from its $34 billion bet on Red Hat
Red Hat continues to see strong growth six months after closing a $34 billion merger deal with technology giant IBM.
The open-source software company, whose main operations are in downtown Raleigh, saw its revenue grow by 24% in the last quarter, eclipsing a billion dollars in a quarter for the first time, IBM’s Chief Financial Officer Jim Kavanaugh told investors on Tuesday.
Kavanaugh said customers continue to show strong demand for the combination of Red Hat and IBM’s cloud software, which reported earnings this week for just the second time since it bought Red Hat.
Specifically, he pointed to a new offering from the combined companies — cloud-based software called Cloud Paks that brings together technologies from IBM and Red Hat — as proving the strength of merging the companies together. More than 2,000 customers are now using combined Red Hat and IBM products, he added.
“We’re starting to realize the synergies from the combination of IBM and Red Hat in Cloud Paks ... and in Red Hat itself,” Kavanaugh said.
During the call, IBM highlighted partnerships with companies like Box and Workday as how customers are combining Red Hat and IBM products.
Box, a file-sharing service, is using Red Hat to power its IT infrastructure while also employing IBM’s Watson technology for artificial intelligence services. Workday, which makes human resources software, has also decided to use Red Hat to support its infrastructure and is expanding its use of IBM’s cloud.
21 deals worth more than $10 million
Red Hat, Kavanaugh added, also inked 21 deals worth more than $10 million last quarter, twice the number of the previous quarter.
Last October, in its first earnings call with investors after the close of Red Hat deal, IBM officials said Red Hat had hired an additional 1,000 employees to handle increased demand for Red Hat’s products.
“We’re off to a great start with Red Hat, with solid revenue trajectory and expanding client base, both good indicators of our clients’ confidence in the value of IBM and Red Hat together,” Kavanaugh said.
The merger of IBM and Red Hat has significant implications for the Triangle region. Red Hat is one of the largest employers in downtown Raleigh, where its headcount has surged into the thousands, and IBM still has a large office in Research Triangle Park.
Betting big on Red Hat
IBM’s big bet on Red Hat — the largest acquisition in the company’s more than 100 years of history — is meant to boost revenue at the legacy tech giant, which has seen declines in many of its business segments.
During the call on Tuesday, Kavanaugh said IBM would be reorganizing its technology services segment to make it more cost-competitive, though he didn’t give away any details of how that would be done.
The company has pitched its acquisition of Red Hat as a way for it to compete with other large tech companies in the hybrid-cloud software space. In the hybrid cloud space — a term for the way companies use a mix of on-site, private and third-party cloud services to host data and services — IBM has heavy competition from Amazon’s AWS and Microsoft’s Azure.
In some good news for IBM, however, the company said its fourth-quarter revenue grew by 0.1% — its first quarter of growth after five straight quarters of year-over-year declines, according to The Wall Street Journal.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate
This story was originally published January 22, 2020 at 12:52 PM with the headline "So far, IBM is getting its money’s worth from its $34 billion bet on Red Hat."
