Red Hat acquires CoreOS for $250 million in Kubernetes expansion

Fundings and Exits

Red Hat, a company best known for its enterprise Linux products, has been making a big play for Kubernetes and containerization in recent years with its OpenShift Kubernetes product. Today the company decided to expand on that by acquiring CoreOS, a container management startup, for $250 million.

The company’s core products include CoreOS, a Linux distribution and Tectonic, a container management solution based on the open source Kubernetes container orchestration platform, originally developed by Google. (For more information on containers, see this article.)

CoreOs and Red Hat have been among the top contributors to Kubernetes, along with Google, FathomDB, ZTE Corporation, Huawei, IBM, Microsoft, Fujitsu and Mirantis.

Perhaps by working so closely on Kubernetes, CoreOS and Red Hat formed a bond, and it eventually made sense for them to come together and share customers and brain power. The companies also had competing Linux distros with CoreOS and Red Hat Atomic concentrating on containers, and perhaps the two can find some common developer ground by combining the two.

If the next generation of software is going to be in a hybrid cloud world where part lives on prem in the data center and part in the public cloud, having a cloud-native fabric to deliver applications in a single way is going to be critical. Red Hat’s president of products and technologies, Paul Cormier said that the combined companies are providing a powerful way to span environments.

“The next era of technology is being driven by container-based applications that span multi- and hybrid cloud environments, including physical, virtual, private cloud and public cloud platforms. Kubernetes, containers and Linux are at the heart of this transformation, and like Red Hat, CoreOS has been a leader in both the upstream open source communities that are fueling these innovations and its work to bring enterprise-grade Kubernetes to customers,” Cormier said in a statement.

As CoreOS CEO Alex Polvi told me in an interview last year, “As a company we helped create the whole container category alongside Google, Docker and Red Hat. We helped create a whole new category of infrastructure,” he said.

His company was early to the game by developing an enterprise Kubernetes product, and he was able to capitalize on that. “We called Kubernetes super-duper early and helped enterprises like Ticketmaster and Starbucks adopt Kubernetes,” he said.

He explained that Tectonic included four main categories, including governance, monitoring tools, chargeback accounting and one-click upgrades.

Red Hat CEO Jim Whitehurst told us in an interview last year that his company also came early to containers and Kubernetes. He said the company recognized containers included an operating system kernel, which was usually Linux. One thing they understood was Linux, so they started delving into Kubernetes and containerization and built OpenShift.

CoreOS has raised $50 million since its inception in 2013. Investors include GV (formerly Google Ventures) and Kleiner Perkins, which appear to have gotten nice returns. The most recent round was a $28 million Series B in May 2016 led by GV. One interesting aside is that Google, which has been a big contributor to Kubernetes itself and whose venture arm helped finance CoreOS, was scooped by Red Hat in this deal.

The deal is expected to close this month, and given we only have one day left, chances are it’s done.

Featured Image: Bz3rk/Wikimedia Commons UNDER A CC BY-SA 3.0 LICENSE

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