Comment by ethbro
7 years ago
On acquisitions, I can offer the anecdote of a friend working at a startup IBM purchased.
Things started with "IBM loves you, and pledges to stay hands off and help you do what you're already doing", continued to "We're going to replace a few management positions with folks from IBM" and "We're changing some benefits, titles, and procedures to better align with The IBM Way", and finally ended up with "You aren't meeting your sales targets, so we're going to overhaul your leadership."
Admittedly, this was a much smaller company than Red Hat. But they were profitable before being bought and had a respected product and growth.
That sounds about right. And, I suspect it'll happen to Red Hat, too, despite the fact that Red Hat is a money printing machine. They've been literally unbelievably effective at turning open source into profit (as someone who's tried to make money on building Open Source software for roughly 20 years, I find it difficult to comprehend how much money Red Hat makes). I've even occasionally considered applying at Red Hat a few times over the years (and have on a couple of occasions been encouraged to do so by people within Red Hat), just to get a direct view of how they do it.
But, IBM is a different beast. They make a lot of money on Open Source, too, but they're not a software company. It's ancillary to their core competency, and so when software goes in, it seems to eventually become a meandering bloated and bulbous creature without a clear purpose or direction, and most of the really smart people seem to leave within a year or two.
If you compare Oracle and IBM, Oracle comes off as competent.
Not in terms of technical ability; they are about equivalent. But for everything else, IBM is just a lame copy.
That seems far-fetched, to me. Oracle is very focused on being evil and making a lot of money. IBM is ambivalent about being evil.
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Isn't it how pretty much any acquisition goes? That's my experience from the inside anyway. All hell breaks loose once the golden handcuffs have expired (3 years mark usually?) and people including management can quit with a full payout.
That lines up very closely with the experience of some friends who sold their (growing rapidly, highly profitable) startup to IBM.
It took a few months for them to realise their startup was going to languish completely within IBM, and their destiny for the 2 years after acquisition was to sit by quietly and wait for their payout, while looking for the next thing to do.
Any time & effort they put into trying to grow their startup product's future within IBM was going to be a waste of everyone's time. This was a hard lesson for them to learn post-acquisition, but I think the money in their bank accounts 2 years down the track will help them get over it
I really don't understand the point of this anecdote.
This is standard practice for almost every acquisition. If the startup didn't want to be part of the IBM way of doing things they shouldn't have agreed to be acquired by IBM.
In fact the rare situation was the Facebook "acquire but treat more like an independent subsidiary" model. And even that didn't last all that long.
> If the startup didn't want to be part of the IBM way of doing things they shouldn't have agreed to be acquired by IBM.
In this situation, I don't think it makes sense to think of an organization as a single, monolithic entity. In this context, the only sane way to think about Red Hat is as over 12,000 employees, plus I-don't-know-how-many shareholders.
Only a very small number of those "agreed to be acquired by IBM". Probably less than 0.1% of them. They are probably also going to be the ones who are going to be the least affected by how IBM operates internally. They've now got FU money, so, as soon as whatever retention agreements they may or may not have signed expire, they'll be prancing out the door.
Everyone else probably knows very little about it - the linked press release indicates that this is probably a surprise for about 12,000 Red Hat employees, most of whom won't be getting any additional details until tomorrow's all hands meeting.
management and the board agreed to the deal. Companies are not democracies , while it is nice to have grassroots approval , it is a top down process. the very nature of these transactions make it impossible to disclose until it is done.
Ultimately in a decision like this the board has only one entity to consider -shareholders , if they believe the deal will create more value to shareholders they should consider it
Value maybe subjective Of course shareholders could be against for ideological reasons and prefer not take the money, that doesn't seem to be the case here.
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Re: "Importantly, Red Hat is still Red Hat. When the transaction closes, as I noted above, we will be a distinct unit within IBM and I will report directly to Ginni. [...] They understand and value how and why we are different and they are committed to allowing us to remain Red Hat while scaling and accelerating all that makes us great with their resources."
Standard acquisition speak. Means nothing.