International Business Machines Corp. CEO Ginni Rometty just stood on top of the world. In a few years, she plans to be sitting on top of it, too.
IBM announced this week that it would pay $14 billion for Red Hat Inc., the world’s biggest public cloud company, in a deal that transforms IBM into a leading challenger to Amazon.com Inc. and Microsoft Corp.
IBM, based in Armonk, N.Y., will fold most of Red Hat’s 17,000 employees into IBM’s own Global Technology Services operations. Red Hat is headquartered in Raleigh, N.C.
Rometty can expect to save billions of dollars, not just from buying Red Hat but from merging and rationalizing IBM’s service businesses. Together, IBM and Red Hat also stand to grow its revenue and return nearly $10 billion in cash to shareholders.
Any CEO can expect this kind of offer when they’re a half-billion dollars apart on a deal. The thing to consider is whether this is actually a good deal for IBM.