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Why is IBM Buying Red Hat for $34 billion?

October 29, 2018

Computer technology giant IBM will purchase Red Hat for a record $34 billion.

1 min read

Computer hardware giant IBM will purchase open-source software company Red Hat for $34 billion.

The purchase price ranks among the most expensive technology deals in history and is the highest IBM has ever paid for a company.

Red Hat is the biggest distributor of the Linux operating system, an open-source platform developed by Linus Torvalds in the 1990s.

What’s open source?

Open source platforms allow software developers to make their own additions to code and use it for their own projects, free of charge. That’s in contrast to platforms like the Apple OS and Microsoft Windows, which are developed primarily by the companies, available by license only, and generally not open to outside developers.

Linux is perhaps the best-known open-source platform and is the basis for the Android operating system, among others. Other open-source platforms include Drupal, Mozilla, and WordPress.

Shifting to the cloud

Other large tech companies have recently bought open-source companies, in a bid to stay relevant as more operations shift to the cloud, according to experts.

In June 2018, Microsoft announced it will buy software sharing company Github for $7.5 billion. In March 2018, Salesforce announced a $6.5 billion purchase of MuleSoft,  which allows companies to combine a variety of software platforms through the cloud.

What’s the cloud?

The cloud is a distributed network for computers that allows companies and consumers to store their data and conduct other operations remotely.

Amazon, Google, and Microsoft, which operate large data network centers, are three of the largest cloud services providers.

IBM, which offers both computer hardware and software, is trying to position itself as something of a hybrid, that will let companies develop their own clouds without relying on a large data center from one of the Internet giants, according to reports.

Investing in cloud technology

You can invest in companies that are leading the way in cloud computing. Check out the ETFs and selected single stocks on Stash.

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By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

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