ARMONK, N.Y. - IBM (NYSE: NYSE:IBM) has announced a definitive agreement to acquire HashiCorp Inc. (NASDAQ: NASDAQ:HCP), a recognized leader in multi-cloud infrastructure automation software, for $35 per share or an enterprise value of $6.4 billion. This acquisition, payable in cash, is set to bolster IBM's hybrid cloud and AI capabilities, with HashiCorp's suite of products expected to drive significant synergies across IBM's strategic growth areas, including Red Hat, WatsonX, data security, IT automation, and consulting.
The transaction, which is anticipated to be accretive to IBM's Adjusted EBITDA within the first full year post-closure and to free cash flow in the second year, aligns with IBM's focus on hybrid cloud and AI as transformative technologies for its clients. HashiCorp's offerings are designed to manage the complexity of infrastructure and application sprawl, with Terraform, their industry-standard tool for infrastructure provisioning, being a key component in their suite.
IBM's Chairman and CEO, Arvind Krishna, highlighted the challenges enterprises face with the expansion in infrastructure and applications across various environments. He pointed out that the acquisition will create a comprehensive hybrid cloud platform tailored for the AI era. HashiCorp's co-founder and CTO, Armon Dadgar, expressed excitement about joining IBM to accelerate HashiCorp's mission and expand product access to a broader set of developers and enterprises.
The acquisition is expected to close by the end of 2024, subject to approval by HashiCorp shareholders, regulatory approvals, and other customary closing conditions. HashiCorp's major shareholders, holding approximately 43% of the voting power, have entered into an agreement to vote in favor of the transaction.
HashiCorp serves over 4,400 clients, including prominent names like Bloomberg and Starbucks (NASDAQ:SBUX), and its products are used by 85% of the Fortune 500. The company's community products for infrastructure and security have seen over 500 million downloads in fiscal year 2024.
This strategic move by IBM aims to address a total cloud opportunity, which according to IDC had a TAM of $1.1 trillion in 2023, with a high compound annual growth rate through 2027. The acquisition is poised to expand IBM's total addressable market by offering a more comprehensive set of hybrid and multi-cloud solutions to enterprise clients.
InvestingPro Insights
As IBM (NYSE: IBM) prepares to enhance its hybrid cloud and AI offerings with the acquisition of HashiCorp Inc., it's important to look at the company's financial health and market position. IBM's commitment to innovation and growth is reflected in its consistent dividend history, having raised its dividend for 28 consecutive years and maintained payments for 54 years. This track record positions IBM as a stable and reliable investment, especially for income-focused investors. The company's low price volatility further underscores its reputation as a steady player in the market.
Looking at the real-time data from InvestingPro, IBM's market capitalization stands strong at $168.46 billion. The company's Price/Earnings (P/E) Ratio is currently at 22.31, with an adjusted P/E for the last twelve months as of Q4 2023 at 21.38, indicating how investors are valuing the company's earnings. IBM's Price/Book ratio for the same period is 7.48, which is relatively high, suggesting that the market may be expecting higher growth or that the company's assets have significant intangible value.
Investors eyeing IBM's upcoming performance should note that 4 analysts have revised their earnings downwards for the upcoming period, as per InvestingPro Tips. However, with the company's significant return over the last year and a large price uptick in the last six months, the overall outlook remains positive. For those interested in further insights, InvestingPro offers additional tips, and users can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
The strategic acquisition of HashiCorp Inc. is expected to serve as a catalyst for IBM's growth in the cloud sector, potentially influencing future financial metrics and market performance. Investors and stakeholders can stay informed on IBM's progress and gain more in-depth analysis by accessing the 9 additional InvestingPro Tips available at https://www.investing.com/pro/IBM.
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