BIG BLUE GETS A RED TINT.

• Author: Mildenberg, David
• Position: STATE WIDE: Triangle

IBM's $34 billion acquisition of Red Hat, the third-biggest tech deal in U.S. history, caps an incredible run for the Raleigh-based company that Bob Young and Matt Ewing started in 1993-94. Providing open-source software was an audacious idea that poked at operating-system powerhouses Microsoft and Apple. An initial question was how a business based on providing something for free had any potential for profit.

But Red Hat figured it out under leadership of Young; Matt Szulik, who was CEO from 1998-2007; and Jim Whitehurst, who has been in charge over the last decade. The company became a pillar of the Triangle's tech community and downtown Raleigh, where more than 2,000 employees fill a 19-story tower that was the headquarters of Progress Energy. Overall, Red Hat employs 12,600.

IBM, which once employed more than 20,000 people in North Carolina, has plateaued with nearly six years of declining sales, reversing slightly earlier this year. In 1990, when Microsoft issued its Windows 3.0 product, IBM had annual revenue of $69 billion, while Microsoft had about $800 million. Twenty-eight years later, IBM has revenue of about $80 billion, while Microsoft now tops $100 billion.

Big Blue paid about 11 times Red Hat's annual earnings, a premium that suggests the company wasn't for sale but couldn't turn down such a rich offer, according to the...