IBM TO ACQUIRE HASHICORP AT USD 6,400,000,000 VALUATION TO EXPAND ITS CLOUD PORTFOLIO- CHECK DETAILS

International Business Machines (IBM) announced its acquisition of HashiCorp in a deal valued at USD 6.4 billion (6,400,000,000), aiming to bolster its cloud-based software offerings and capitalize on the growing demand for AI-powered solutions.

As IBM navigates challenges in its consulting business due to cautious enterprise spending amidst higher interest rates, the software segment emerges as a bright spot. The acquisition of HashiCorp aligns with IBM's strategy to strengthen its position in the cloud market, where AI-driven technologies are driving significant demand.

Deal Details and Market Response

IBM will pay USD 35 per share for HashiCorp, representing a substantial premium of 42.6 per cent over Monday's closing price. HashiCorp's shares surged following media reports of the acquisition talks, while IBM's stock saw a decline of 7 per cent in extended trading on Wednesday after reporting first-quarter revenue slightly below estimates. Despite this, HashiCorp's shares rose over 4 per cent in extended trading.

IBM's Financial Performance and Market Dynamics

IBM's first-quarter total revenue of USD 14.46 billion fell marginally short of estimates, with flat sales in the consulting segment. CFO Jim Kavanaugh attributed this to enterprises tightening discretionary spending in the face of macroeconomic uncertainty. Accenture's reduced revenue forecast for fiscal year 2024 further underscores the cautious spending trend in the consulting industry.

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Focus on Cloud and AI

IBM's software business experienced a notable 5.5 per cent growth in the first quarter, with a particular focus on cloud services. Recognizing the increasing importance of cloud infrastructure for AI applications, IBM has prioritized the expansion of its cloud capabilities to meet the growing demand for data storage and processing.

HashiCorp, based in California, specializes in enabling customers to establish and manage cloud infrastructures. IBM views the acquisition as a strategic move to enhance its existing portfolio, leveraging HashiCorp's expertise to strengthen its position in the cloud market.

IBM expects the HashiCorp acquisition to contribute to adjusted core profit within the first full year of closing, anticipated by the end of 2024. The deal will be financed using cash on hand. With IBM's "AI book of business" surpassing $1 billion in the first quarter and showing sequential growth, the company is optimistic about the future prospects following the acquisition.

Stephen Elliot, a vice president at market research firm International Data Corp, views the acquisition as a smart move for IBM, emphasizing HashiCorp's leadership position in the industry and its complementarity with IBM's existing offerings.

2024-04-25T03:29:08Z dg43tfdfdgfd