Big IBM Deal Raises Eyebrows

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One of our technology giants International Business Machines Corporation (IBM) [NYSE: IBM], headquartered in New York, is now another company that has been added to the list as acquiring.

IBM’s business includes, but not limited to, manufacturing and marketing hardware and software products. The company has invented several products we have used in the past and are now using, including the floppy disk, hard disk drive, dynamic random-access memory and one of the most widely used technologies for bank transactions, the automated teller machine (ATM). They also specialize in research and holds the record, as of 2018 and for 25 consecutive years, for the most U.S. patents generated by a business.

As we know, one strategy companies use in order to deepen their market penetration and sentiment, is by acquiring or merging with companies that are sharper in different key areas of a company.

This is one strategy IBM is using.

According to numerous financial sites and blogs, including Bloomberg, IBM has made an announcement that they are soon to have significant interest in an open-source software company, Red Hat [NYSE: RHT]. The deal includes IBM purchasing the company for US$ 190.00 per share.

How much does this work out to?

US$ 34 Billion! Yes, Billion. That is approximately J$ 4.63 Trillion! That figure would cover the cost  of 184,000 houses at J$ 25 Million, send over 300,000 students to medical school or just money to do or buy absolutely anything you wanted for the rest of your life. This would be life changing money to secure generations’.

But! That is nothing for IBM. They see it as an investment and it sure is one.

Recently, market sentiment had decreased for Red Hat, even with a market cap of almost US$ 20.5 Billion and being the leading Linux company, they had not only missed its revenue estimates but missed the target set by Wall Street.

However, this is going to be the biggest open-source business deal ever!

One person who would more than be confident about this acquisition would be the CEO of IBM. Ginni Rometty, CEO of IBM, is more than confident about the deal and expressed how he feels about the it and the benefits it will bring. He said “The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. IBM will become the world’s #1 hybrid cloud provider, offering companies the only cloud solution that will unlock the full value of the cloud for their businesses.”

This gives IBM the cutting edge over many companies who have not even reached half way through their cloud journey. Here, the company has found a way to not only drive growth but also boost the value of its business. It is through this, that the company can also establish different strategies and processes, creating more efficiency through the integration of all parts of the business; pushing them to their highest level possible, all from the beginning of the process chain to the very end.

Red Hat’s CEO also commented and is pleased with the deal being conducted with IBM. He believes that this acquisition will provide them with the resources and capabilities needed to broaden market share and bring more knowledge about open source in today’s world. Despite this acquisition however, Red Hat still wishes to maintain their commitment and uniqueness they brought to the technology world.

Though IBM’s revenue has decreased by a little over 2% year-over-year to 18.76 Billion for their last quarter, the company still has 5.5 times the market share of Red Hat, provides investors with a 38% return based on stock price and is a great dividend play of 5%. This of course is a stock for investors with a risky appetite but is also great for income.

IBM closed on October 26, 2018 at 124.79, just 1 dollar away from its 52-week low. It may just be a time to BUY!


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