Red Hat won't become just another division of IBM, executives from both companies told investors on Tuesday after the $34-billion deal officially closed.
There's a lot riding on how the deal, which was first announced last October and is the largest in IBM's history, is executed within the 108-year-old computing giant. IBM (IBM - Get Report) shares were down 0.9% on Tuesday and are up 22% year to date.
On a call, Arvind Krishna, SVP cloud and cognitive software at IBM, said that Red Hat, which makes open-source software products for enterprises, will remain an independent unit of IBM with a separate structure and sales team.
"IBM and Red Hat have different cultures; there's no desire to meld these cultures together," he said, paraphrasing previous remarks made by IBM CEO Ginny Rometty.
As for IBM's expectations from the acquisition, Krishna and Paul Cormier, president of products & technologies at Red Hat, told investors that the deal is intended to make IBM a leader in the fast-evolving market for cloud services.
The majority of enterprises use multiple clouds -- both public and private -- as well as various data center environments, and there's an appetite for services that help companies to more easily manage all those environments, the executives said. IBM defined the market as a trillion-dollar opportunity.
"We want to be the leading provider of that opportunity," Krishna added.
IBM's competitors in cloud services, including Alphabet (GOOGL - Get Report) and Microsoft (MSFT - Get Report) , have increasingly embraced a so-called multi-cloud or hybrid cloud strategy in a bid to win more customers. In April, Google Cloud rolled out a new platform called Anthos, which offers a single terminal from which to manage different various cloud environments.
From a financial perspective, IBM said that the deal is expected to be accretive to IBM's operating gross profit margin in the first year and will contribute roughly two percentage points of compound annual revenue growth over a five-year period.