The Bottom Line on IBM Stock
When all is said and done, Red Hat won’t do much to alter IBM’s fiscal stagnation. Synergy is the
intended outcome of most acquisitions, and it’s not clear if this deal will create any synergy. And IBM
just paid a steep price for a new revenue stream. Specifically, IBM is forking over more than ten times
Red Hat’s trailing revenue and more than 40 times Red Hat’s likely earnings for 2019.
Most importantly, the deal may destroy the one thing that has made Red Hat the success it has
become.
Science and technology venture fund Siana Capital’s Siddharth Pai wrote, “Red Hat has managed to
build many strong ongoing relationships with service providers since it is viewed as an independent.
IBM, on the other hand, given the ‘frenemy’ status it has since it both sells to and competes with service
providers, has far fewer frictionless relationships.”
Translation: International Business Machines may well find a way to undo what makes Red Hat so
great by damaging its relationships with its customers.
And finally, there’s no assurance that the acquisition of Red Hat will enable IBM to do anything it
couldn’t do without making the deal.
https://investorplace.com/2018/11/ibm-stock-red-hat-acquisition/