IBM to acquire HashiCorp in $6.4 billion deal, reports another revenue miss

IBM shares slipped as much as 9% in extended trading Wednesday after the hardware, software and consulting provider said it would acquire cloud software maker HashiCorp and reported first-quarter revenue that was lower than analysts had predicted.

In a statement, IBM announced that it intends to pay $35 per share in cash for HashiCorp in a deal with a $6.4 billion enterprise value, net of cash. On Tuesday, The Wall Street Journal reported that IBM was getting close to acquiring HashiCorp, sending shares upward. Bloomberg said earlier on Wednesday that IBM was looking to offer $35 per share.

The deal would be accretive to adjusted earnings before interest, taxes, depreciation and amortization in the first full year after close, and accretive to free cash flow in the second year after close. IBM said it expects the transaction to close by the end of 2024. Dave McJannet, HashiCorp's CEO, will report to Rob Thomas, IBM's senior vice president in charge of software, if the deal goes through, a spokesperson said.

HashiCorp would complement Red Hat, which has contributed to IBM's revenue growth since the $34 billion acquisition in 2019. IBM now sells Red Hat's version of the Linux operating system for use on multiple public clouds, making it a neutral entity.

HashiCorp pioneered open-source software that developers rely on to control cloud infrastructure. Premium versions of the Terraform cloud-management software and other products have brought revenue to HashiCorp.

In 2021 HashiCorp shares started trading on the Nasdaq. But revenue growth has slowed, and the company has continued to report losses. Still, it's adding revenue at a faster pace than IBM.

"We see multiple drivers of product synergies within IBM and accelerating growth