IBM to buy cloud software provider HashiCorp in a $6.4 billion deal

In a strategic move to expand into the cloud, International Business Machines Corp (IBM) has announced its acquisition of HashiCorp Inc. for a hefty $6.4 billion enterprise value. This acquisition not only expands IBM’s cloud-based software offerings but also positions the tech giant to capitalize on the burgeoning demand for AI-powered solutions.

HashiCorp, known for its software specializing in infrastructure and security life cycle management, combined with Red Hat’s arsenal, could pave the way for IBM to make multi-cloud computing a tangible reality.

Amidst cautious spending trends in the consulting sector due to rising interest rates, IBM’s focus on software has been a beacon of success. The $35 per share deal with San Francisco-based HashiCorp, confirmed on Wednesday by Bloomberg, saw HashiCorp’s stock surging over 4% in after-hours trading while IBM experienced a 7% dip, despite reporting first-quarter revenue slightly below estimates.

IBM’s CFO Jim Kavanaugh highlighted the impact of the uncertain economic landscape on client spending patterns, echoing sentiments expressed by other industry players like Accenture, which trimmed its fiscal-year 2024 revenue forecast in response to subdued client spending.

Despite challenges, IBM’s software business saw a healthy 5.5% growth in the first quarter, signaling the company’s commitment to bolstering its cloud capabilities to meet the escalating demands of AI-driven applications.

The HashiCorp acquisition, slated to close by the end of 2024, will be financed through existing cash reserves and is expected to contribute positively to IBM’s adjusted core profit within the first year of completion.

HashiCorp, headquartered in California, offers cloud infrastructure management solutions, making it a strategic fit for IBM’s expanding portfolio, according to Stephen Elliot, a vice president at International Data Corp.

In essence, IBM’s move to acquire HashiCorp signifies a shrewd strategic maneuver aimed at fortifying its position in the cloud computing domain and capitalizing on the burgeoning AI market.