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IBM Investor Briefing: Red Hat Enables Cloud-Native Software to Run on Any Platform; Updates Guidance

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Coresight Research

Key Points

On August 2, 2019, IBM held an investor briefing to detail plans for its acquisition of Red Hat and provide a guidance update.

  • IBM has transformed its software to be cloud-native and run on any cloud platform by leveraging the technology of recently acquired Red Hat.
  • The company stated that enterprises can build mission-critical applications and run them on all leading public or private cloud platforms.
  • IBM also announced the availability of its OpenShift foundation for building containerized applications on IBM Cloud, IBM Z and LinuxONE, in addition to related consulting and technology services for Red Hat.
  • IBM expects the acquisition to add 200 bps to revenue growth over the next five years, but to also dilute 2019 EPS to at least $12.80 from at least $13.90 previously, to be less dilutive in 2020 and be accretive to operating EPS in 2021.

On August 2, 2019, IBM provided an investor briefing to detail plans for its acquisition of Red Hat and provide a guidance update.

IBM has transformed its software to be cloud-native and run on any cloud platform by leveraging the technology of recently acquired Red Hat.

The company stated that enterprises can build mission-critical applications and run them on all leading public or private cloud platforms.

IBM also announced the availability of its OpenShift foundation for building containerized applications on IBM Cloud, IBM Z and LinuxONE, in addition to related consulting and technology services for Red Hat.

The company sizes the cloud opportunity at $1.2 billion, comprising services, infrastructure, software and technology sold to cloud service providers.

Cloud customers include Kohl’s and leading global service and industrial companies.

IBM expects the acquisition to add 200 bps to revenue growth over the next five years, but to dilute 2019 EPS to at least $12.80 from at least $13.90 previously, to be less dilutive in 2020 and be accretive to operating EPS in 2021.

Implications for Retail

IBM has strengthened its cloud service offerings through the Red Hat acquisition, enabling retailers such as Kohl’s to move mission-critical applications to their cloud service provider of choice.

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