IBM to Buy HashiCorp in $6.4 Billion Deal

By Ben Glickman

International Business Machines agreed to buy cloud-software company HashiCorp in a deal with an enterprise value of $6.4 billion, extending the tech company's push into cloud and artificial intelligence as those offerings drive growth.

IBM would pay $35 a share for HashiCorp in cash, giving the company access to HashiCorp's roster of some 4,400 clients, IBM said.

The Wall Street Journal on Tuesday reported that the two sides were near a deal. Shares of HashiCorp, which had been trading at nearly $25 before the report, soared more than 25% before closing Tuesday around $29.15.

San Francisco-based HashiCorp makes products to help customers set up cloud infrastructure.

The deal is expected to boost business for IBM's existing segments, Chief Financial Officer Jim Kavanaugh said in an interview. He noted HashiCorp's already strong growth would buoy the rest of IBM.

"It's a much faster growing company overall," Kavanaugh said. "You put that into IBM, it accelerates our growth over time."

The acquisition is still subject to approval from regulators and HashiCorp shareholders. IBM said that HashiCorp's largest shareholders, representing about 44% of voting power, had agreed to vote all their shares to approve the transaction.

The deal is expected to close by the end of the year.

IBM announced the deal as it reported first-quarter revenue below Wall Street's estimates. Stronger growth in the company's software segment, which includes AI products and automation software, was largely offset by lower revenue in infrastructure.

IBM's book of business for its watsonx and generative AI offerings grew sequentially, and was now above $1 billion, the company said.

The company's profit rose to $1.61 billion, or $1.72 a share, in the three months ended March 31, from $927 million, or $1.01 a share, a year earlier. Analysts polled by FactSet were expecting per-share profit of $1.60.

Revenue edged up 1.5% to $14.46 billion, falling short of Wall Street's expectations for $14.53 billion.

Software revenue was up 5.5% from a year earlier, while consulting revenue slipped 0.2% and infrastructure fell 0.7%.

IBM backed its full-year guidance for revenue, saying it expects growth consistent with its mid-single digit growth model after adjusting for currency fluctuations.

Write to Ben Glickman at ben.glickman@wsj.com

(END) Dow Jones Newswires

April 24, 2024 16:27 ET (20:27 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.