Red Hat to acquire API management company 3scale

Red Hat has signed a definitive agreement to acquire 3scale, a provider of application programming interface (API) management technology.

By adding 3scale to its existing portfolio, including Red Hat JBoss Middleware, Red Hat OpenShift and Red Hat Mobile Application Platform, Red Hat strengthens its enablement of the API economy with simplified cloud integration and microservices-based architectures.

Craig Muzilla, Senior Vice President, Application Platforms Business, Red Hat, said, “APIs play an important role in helping to accelerate innovation and business growth in the digital economy. With digital transformation initiatives identified as a top priority for organisations today, API management has become the foundation for exposing those APIs for better use, performance, and value creation. 3scale complements our existing middleware product portfolio and Red Hat OpenShift by enabling companies to create and publish APIs with tools such as Red Hat JBoss Fuse, and then manage and drive adoption of those APIs once they have been published.”

3scale and Red Hat began partnering in early 2015 to deliver a comprehensive platform for API-based application development. The joint solution will combine 3scal’se API Management Platform with technologies from Red Hat JBoss Middleware, Red Hat OpenShift and Red Hat Mobile Application Platform to provide an API-centric development, deployment, and management offering designed to accelerate application time-to-market. Red Hat JBoss Middleware customers will benefit from the hybrid-cloud capabilities from 3scale for modern architectures. Mobile application development in particular is highly API-centric and 3scale’s platform combined with the Red Hat Mobile Application Platform can lead to development and management simplicity at massive scales.

The acquisition is expected to have no material impact to Red Hat’s revenue for the second fiscal quarter ending August 31, 2016 (the “second quarter”), or its fiscal year ending 28^th February 2017 (“fiscal 2017”). Management expects GAAP operating expense to increase by approximately $3 million, or ($0.01) per share, in the second quarter and approximately $7 million, or ($0.03) per share, for fiscal 2017 as a result of the transaction. Management expects that non-GAAP operating expense will increase by approximately $1.5 million, or approximately ($0.01) per share, in the second quarter and approximately $5 million, or approximately ($0.03) per share, for fiscal 2017 as a result of the transaction. Red Hat calculates non-GAAP operating expense by subtracting from GAAP operating expense the estimated impact of non-cash share-based compensation expense, which is expected to increase by approximately $0.8 million for the second quarter, amortisation of intangible assets, which is expected to increase by approximately $0.2 million for each of the remaining quarters in fiscal 2017, and transaction costs related to business combinations, which are expected to be less than $1 million in the second quarter. For Red Hat’s full forecast, including the expected impact of the transaction on GAAP and non-GAAP operating margin and GAAP and non-GAAP earnings per share, refer to the guidance provided in its 22^nd June 2016 earnings press release.

Steven Willmott, CEO, 3scale, said, “We’ve already seen great customer success combining Red Hat’s excellent middleware platform with 3scale API management, and we see tremendous opportunity to benefit customers even more as they expand their API, middleware and microservices plans. We see this as a natural extension of our relationship, and we’re excited to be joining an organisation with such a strong commitment to open standards, open source and spreading the benefits of technology.” 

The transaction is expected to close in June 2016, subject to customary closing conditions.