IBM Closes World's Second Biggest IT Deal

The American multinational company, IBM closed its $34 billion purchase of Red Hat on Tuesday, the second largest deal in the information technology business in the world.

Red Hat is also an American company and provides enterprise open source solutions.

IBM's purchase was made with an intent to boost its cloud computing business, competing with market leaders Amazon Inc and Microsoft Corp that offer computing and other software services over the internet.

The company had agreed to buy Red Hat in October last year, marking its biggest acquisition in its more than 100-year history. Chief Executive Officer Ginni Rometty has been steering the company toward faster-growing segments such as cloud, software and services and away from traditional hardware products, to save the brand from becoming irrelevant.

"This is about hybrid cloud - it is the future, it is the destination of the cloud," she said in an interview.

Having already fallen behind in public cloud, IBM is now betting big on the so-called hybrid cloud, which allows companies to simultaneously run programs on their own internal servers and the big public cloud providers like Amazon Web Services and Microsoft's Azure. This way, the company will be positioned as a partner and not a competitor.