IBM Buys HashiCorp For $6.4 Billion, Reports Another Revenue Miss

(CTN News) – During extended trading on Wednesday, IBM shares fell 4% after the company announced it was acquiring cloud software maker HashiCorp and reported lower first-quarter revenue than expected.

The company announced today that it intends to pay $35 per share for HashiCorp, with an enterprise value of $6.4 billion. HashiCorp shares rose Tuesday after The Wall Street Journal reported IBM was close to acquiring the company. In an earlier report on Wednesday, Bloomberg reported that IBM was contemplating a $35 price per share offer.

After the deal closes, adjusted earnings before interest, taxes, depreciation and amortization would be accretive in the first full year, and free cash flow would be accretive in the second.

According to IBM, the transaction should close by the end of 2024.

A spokesperson for IBM said Dave McJannet, HashiCorp’s CEO, will report to Rob Thomas, IBM’s senior vice president in charge of software.

IBM’s revenue growth has been driven by Red Hat, which was acquired by IBM for $34 billion in 2019. Having sold Red Hat’s Linux operating system to multiple public clouds makes a neutral player in the Linux market. Cloud infrastructure can be controlled by developers with the help of open-source software developed by HashiCorp. In addition to Terraform cloud management software, HashiCorp sells other products for a premium price.

HashiCorp shares started trading on Nasdaq in 2021. Despite this, the company has continued to report losses and slowed revenue growth. Even so, it’s adding revenue more quickly.

Stocks of HashCorp moved higher after the acquisition announcement in extended trading by 3%.

Based on LSEG’s poll of analysts, IBM did the following:

• An adjusted $1.68 earnings per share compares to an expected $1.60 earnings per share

• In terms of revenue, $14.46 billion was reported versus $14.55 billion expected

Revenue for IBM increased around 1.5% from a year earlier. It’s the company’s third revenue miss in the last five quarters.

StreetAccount reported $5.90 billion in revenue from software, down slightly from the $5.96 billion consensus among analysts.

StreetAccount expected consulting revenue to come in at $5.20 billion, but the company reported $5.19 billion instead. A total of $3.08 billion was generated by infrastructure. StreetAccount’s consensus of $2.94 billion was higher than the actual result of 0.7% decline.

With the quarter ending this month, IBM reported it provided its 160,000 consultants with artificial intelligence assistants to boost productivity, as well as the completion of its divestiture of The Weather Company to Francisco Partners. However, IBM shares have outperformed the S&P 500 index, which is up 6% over the same period despite the after-hours move.

The report will be discussed with analysts on a conference call beginning at 5 p.m. Eastern Time.

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