Wall Street thinks that Red Hat's acquisition of IBM will help it in the cloud war

IBM's announcement Sunday of the $ 34 billion acquisition of Red Hat has left many commentators unhappy with the shock of thumbnails.

But now that the surprise has passed, Wall Street is embracing the vision of IBM CEO Ginni Rometty, who says Red Hat will set IBM to become the leading provider of hybrid cloud services: storage that processes information at the same time. times on public and private cloud offerings. servers – which many large companies have been using for decades.

In short: there is a large and untapped market of companies that want to move to the cloud but have not yet done so: companies that could benefit from an extended and hybrid cloud offer.

BTIG analyst Joel Fishbein said: "IBM is on the verge of becoming the world's largest hybrid cloud provider." With around 80 percent of the workloads of companies still needing to be moved to the cloud, market opportunities are still numerous. "

This 80% market opportunity figure comes from IBM itself, which stated that a large number of its customers had only 20% of their workload on the market. cloud.

"They are eager to migrate their business applications to the cloud, the next chapter of the cloud, the next 80 percent," wrote IBM senior vice president of hybrid cloud, Arvind Krishna.

"But to take full advantage of their cloud investments and deploy real-world business applications in the cloud, they need to be able to move and deploy applications and services across multiple cloud environments." Today, they're hesitant to do it, "he said.

Wall Street buys the story

Notes sent to investors on Monday support the business combination, though many have warned that it may take some time for both companies to integrate and see a return on their merger.

IBM, which has experienced a decline in its business for 22 consecutive quarters before returning briefly to growth this year, has struggled to impose itself in the cloud, where Amazon Web Services and Microsoft Azure reign supreme.

But analysts believe that Red Hat could eventually reverse this dynamic.

"Overall, we think it's a transformative acquisition in the hybrid cloud landscape," Barclay's Raimo Lenschow wrote.

Wedbush's Daniel Ives agreed that the acquisition would have broad ramifications, not only for IBM, but also for the largest cloud computing space, adding that it could "trigger" more mergers and acquisitions in the next 6 to 12 years month.

"In our opinion, IBM and Rometty have played a major role in the cloud, such as Amazon (AWS), Microsoft (Azure) and Google (Google Cloud): there is another player in town who is considering a competition aggressive in this massive secular hybrid cloud shift, "wrote Ives.