$5B in revenue for $34B spent. . .
By: Lauren Ohnesorge – Senior Staff Writer, Triangle Business Journal
Jun 4, 2021, 1:15pm EDT
Red Hat’s growth trajectory is accelerating, as is its importance within Big Blue, IBM’s top executive said this week.
When IBM (NYSE: IBM) acquired Red Hat for $34 billion in 2019, the Raleigh-based company was at about $3.5 billion in annual revenue. Now, Red Hat is on track to grow that figure by more than 40 percent.
“This year it will be over $5 billion,” IBM CEO Arvind Krishna told analysts on Thursday at the Annual Bernstein Strategic Decisions Conference.
“So if you can maintain the growth, it actually becomes a bigger and bigger contributor to what goes forward in addition to the synergistic growth in other parts of the business,” Krishna said.
But Krishna, who became CEO just over one year ago, shied away from saying it’s all about Red Hat. While a third of IBM's Global Business Services signings on cloud are related to Red Hat, “there’s another two-thirds that are not,” he said.
“So it is wider than Red Hat, albeit Red Hat is the fastest-growing and a really important part of that puzzle for us,” Krishna said.
In IBM’s most recent quarter, the company reported Red Hat’s revenue growth at 15 percent, led by both Red Hat Enterprise Linux and OpenShift. Overall, IBM's cloud revenue was up 21 percent to $6.5 billion.
Analysts have had high expectations for Red Hat’s place within the IBM organization, with Edward Jones’ Logan Purk saying recently that, with IBM’s planned spinoff of its managed services business, Red Hat could lead the company.
And IBM has definitely been investing in its open source subsidiary.
Last month, Red Hat announced plans to add more than 500 new associates in North America – about half of which are planned for Raleigh.
“We’re definitely performing,” Tim Cramer, Red Hat's SVP of software engineering, previously told TBJ. “We’re doing well, and clearly the open hybrid cloud bet is the one we want to continue on. We’re seeing opportunities in the market that are coming up and we want to make sure we’re investing ahead of those.”