With the acquisition of Red Hat, IBM could expand its business in the cloud computing sector in California and globally. Red Hat brings a chance for the legacy technology company to gain market share against competitors like Amazon and Alphabet that are leading players in the cloud market.

The chairman of IBM’s board said that purchasing Red Hat gives IBM the means to compete strongly as a provider of the only open cloud solution for businesses. The $34 billion purchase price represents an investment meant to alleviate the problems caused by the lackluster performance of IBM’s artificial intelligence technology known as Watson.

Heavy investments in Watson over the years have failed to produce significant results for IBM. One investment bank criticized the company for failing to scale Watson into a profitable and widely adopted service. The bank cited the split between MD Anderson and IBM after MD Anderson spent $60 million on Watson and failed to gain useful results. IBM had hoped to build a strong presence in the financial and healthcare industries with Watson, but excessive data preparation needs, deep learning deficiencies and marketing that could not deliver forced multiple clients to abandon relationships with IBM.

Many reasons motivate companies to acquire other companies or accept merger deals. A person responsible for negotiating the purchase or sale of a company might want the assistance of an attorney knowledgeable about mergers and acquisitions. Legal research may aid a person with valuation, due diligence and contract development. An attorney might warn someone about hidden liabilities or propose solutions when parties have trouble coming to terms.

Source: Tech Crunch, “Forget Watson, the Red Hat acquisition may be the thing that saves IBM“, Jonathan Shieber, Oct. 28, 2018