After IBM (IBM) announced its intention to acquire Red Hat (RHT) for about $34B in a deal with an over 60% premium to Red Hat's Friday closing price, Morgan Stanley analyst Keith Weiss said the announcement reinforced both his confidence in the emergence of Hybrid Cloud architectures and the strength of IT spending into 2019. Red Hat has been Microsoft's (MSFT) primary competitor within server operating systems, and has generally been taking share, said Weiss, who thinks the longer-term opportunity or threat for Microsoft hinges on the ability of IBM to execute well and maintain the open source enthusiasm around the Red Hat distributions. For VMware (VMW) and Pivotal Software (PVTL), while Weiss sees little near-term impact, he adds that the proposed combination would likely result in a fiercer competitive environment going forward. For New Relic (NEWR), he sees little direct competitive impacts from the proposed merger. Given HortonWorks' (HDP) strong existing ties to IBM, Cloudera (CLDR) could benefit by becoming a preferred data management vendor within the OpenShift ecosystem, Weiss added.

Oppenheimer analyst Timothy Horan notes that IBM (IBM) and Red Hat (RHT) have lagged leaders such as Microsoft (MSFT), Amazon (AMZN), Google (GOOG; GOOGL) in the cloud. By merging, they are trying to improve their cloud position and Horan sees them looking to use the disruptive Container/Kubernetes to create a new hybrid cloud platform. Given how far behind they are in infrastructure, the analyst believes they may look to partner much more with Google, which is a threat to Microsoft more so than AWS. While Horan thinks the deal does open up an opportunity for a combined IBM/Red Hat to enter the market with a new service, they still have a long way to go before they can compete with Microsoft and Amazon in cloud.

Credit Suisse analyst Brad Zelnick raised his price target for Red Hat (RHT) to $190 from $150 following the company's announced acquisition by IBM (IBM). The analyst believes the $190 deal price, a 63% premium to Friday's close, represents full value, the result of a competitive process, and he does not foresee other bidders emerging. Further, Zelnick does not see regulatory obstacles blocking this deal. He reiterates a Neutral rating on Red Hat's shares.