Tensions between Japan and South Korea come as the U.S. and its trading partners are embroiled in a global trade war.Technologyread more
The one-to-eight stock split would mean the current number of ordinary shares — which stands at 4 billion — will increase to 32 billion. It comes ahead of a reported Hong Kong...Asia Marketsread more
Minutes from the Reserve Bank of Australia's monetary policy meeting in July showed the central bank was ready to adjust interest rates if required.Asia Marketsread more
Current and former Tesla employees working in the company's open-air "tent" factory say they felt pressure to take shortcuts to hit aggressive Model 3 production goals,...Technologyread more
China's fiscal spending increased 10.7% in the first six months from a year earlier, the finance ministry said on Tuesday, underlining the government's bid to support the...China Economyread more
The findings by McKinsey and Company come amid a year-long tariff fight between the U.S. and China, which has spilled into areas such as technology and security.China Economyread more
Microsoft's considerable reach into the corporate world isn't something Slack CEO Stewart Butterfield is very concerned about.Technologyread more
A devastating outbreak of African swine fever that has killed millions of pigs in China is changing attitudes in a country where farm hygiene has often been seen as lax by...Livestockread more
In a closed-door meeting at a Manhattan mansion, executives outlined changes to controversial software that was implicated in two crashes.Aerospace & Defenseread more
President Donald Trump and the RNC are picking up key supporters in the business community who did not back him as a candidate in 2016.2020 Electionsread more
Amazon workers in Minnesota and Germany are striking as Prime Day kicks off, in a stand against working conditions and wage practices. The action in Minnesota represents the...Retailread more
IBM just agreed to spend $34 billion on Red Hat, the largest software deal ever. It's by far IBM's biggest deal in its 107-year history and follows five straight years of declining revenue at the company.
There's no guarantee such a big bet will pay off. Spending this much won't suddenly vault IBM past Amazon in the public cloud market or turn it into a trendy software growth story like Salesforce or Twilio.
But for a company looking to stay relevant as the technology landscape rapidly evolves, buying Red Hat is a bold move, and there's logic to it.
"This is as transformative as it gets for IBM," Jeffrey Kvaal, an analyst at Nomura Instinet, wrote in a report to clients on Monday.
Here are some of the possible benefits of IBM's acquisition:
Red Hat is a fraction of the size of IBM, but it's growing much faster and generating cash in the process. While analysts project meager growth at IBM this year before contraction again in 2019, they see Red Hat growing at least 15 percent this fiscal year and next. IBM expects the combination to boost revenue growth by 2 percent and increase earnings per share, excluding certain items, two years after it closes.
Part of the expansion should come from sales of Red Hat's products to IBM's bigger base of customers. IBM intends to put its products on Red Hat's software stack, CEO Ginni Rometty said on Monday's call with analysts.
Red Hat's heritage is doing business around the Linux open-source operating system. IBM has a public cloud that competes with Amazon Web Services. But developers use Red Hat's Linux on many public clouds, including those run by Microsoft and Google. That multi-cloud approach should help IBM bring in revenue as more companies choose to go to public clouds that are more popular than its own.
Rometty said that buying Red Hat will help the company become the leader in the hybrid cloud market, and Jim Whitehurst, Red Hat's CEO, said on the call that "this is about providing choice and making sure customers are not locked in."
Rometty said buying Red Hat means getting more than 8 million software developers on board, potentially bringing them closer to IBM's other products.
There's also the opportunity for more consulting work for IBM. Helping deploy Red Hat products like JBoss middleware and the OpenShift software for deploying applications in virtual containers could all fall within IBM's consulting and managed service operations, according to the Nomura report.
"We've been building out our own services capability, but it is very small relative to what IBM can bring to the table," Whitehurst said.
The deal could help IBM, which sells traditional data center hardware, improve its positioning among companies that still run applications in their own facilities.
Setting aside spending on public cloud, "the remaining 90 percent of data center spend is still on HP, IBM, Dell and Cisco, " Dharmesh Thakker, a partner at Battery Ventures who invests in software and infrastructure start-ups, told CNBC in an interview. "IBM is hoping that by having a key asset as part of the mix, they can portray themselves as the best of the bunch."
There's a lot at stake for IBM in the latest mega-deal. Plenty of big tech acquisitions have failed, notably Hewlett-Packard's $25 billion acquisition of Compaq, Microsoft's $7.2 billion purchase of Nokia's Devices and Services business and Google's $12.5 billion deal for Motorola Mobility.
As Cantor Fitzgerald analysts wrote in a report on Monday, "the success of the deal will depend on its execution on the cross-selling/integration side."
— CNBC's Ari Levy contributed to this report.