‘HashiCorp has a proven track record of enabling clients to manage the complexity of today’s infrastructure and application sprawl,’ says IBM CEO Arvind Krishna in a statement Wednesday.

Tech giant IBM has confirmed its intention to buy Terraform creator and cloud infrastructure tools vendor HashiCorp for $6.4 billion, a deal set to close by the end of 2024.

The Armonk, N.Y.-based provider of cloud, mainframe, artificial intelligence and other technology products said in a statement Wednesday that HashiCorp will help with “IBM’s deep focus and investment in hybrid cloud and AI.” IBM said that the acquisition will “enhance” its ability to address more of the $1.1 trillion total cloud addressable market.

“HashiCorp has a proven track record of enabling clients to manage the complexity of today’s infrastructure and application sprawl,” IBM Chairman and CEO Arvind Krishna said in the Wednesday statement. “Combining IBM’s portfolio and expertise with HashiCorp’s capabilities and talent will create a comprehensive hybrid cloud platform designed for the AI era.”

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IBM To Buy HashiCorp

CRN has reached out to IBM and San Francisco-based HashiCorp for comment. IBM’s statement confirming the deal came just minutes before its earnings call reporting the results of the first quarter of its 2024 fiscal year.

Although the deal will take time to close, IBM said it expects “that the transaction will be accretive to Adjusted EBITDA within the first full year, post close, and free cash flow in year two.”

Both companies’ boards have approved the deal, but it still needs approval from HashiCorp shareholders and regulators—although HashiCorp’s largest shareholders and investors, collectively holding about 43 percent of the voting power of the company’s outstanding common stock, have “agreed to vote all of their common shares in favor of the transaction and against any alternative transactions,” according to IBM.

Media reports of IBM and HashiCorp nearing a deal surfaced Tuesday. A report on San Francisco-based publicly traded HashiCorp exploring a sale previously emerged in March.

HashiCorp’s automation capabilities for infrastructure and security life-cycle management and system of record for hybrid and multi-cloud critical workflows made the vendor stand out, according to the IBM statement.

IBM called Terraform “the industry standard for infrastructure provisioning in these environments” and said that HashiCorp should complement IBM’s work in expanding partnerships with hyperscaler cloud service providers and developer communities while innovating open-source hybrid cloud and AI technologies.

HashiCorp’s technology should complement IBM subsidiary Red Hat, IBM AI platform Watsonx, the vendor’s consulting arm and its offerings in data security and IT automation.

Users can combine Red Hat’s Ansible Automation Platform configuration management and Terraform’s automation to simplify application provisioning and configuration across hybrid cloud environments, in one example, according to IBM.

Armon Dadgar, HashiCorp co-founder and CTO, said in the IBM statement that joining the tech giant will “accelerate HashiCorp’s mission and expand access to our products to an even broader set of developers and enterprises.”

HashiCorp CEO Dave McJannet said that IBM is “the ideal home for HashiCorp as we enter the next phase of our growth journey.”

In HashiCorp’s statement about the acquisition, written by Dadgar, the company said that it “will continue to build products and services as HashiCorp, and will operate as a division inside IBM Software.”

“By joining IBM, HashiCorp products can be made available to a much larger audience, enabling us to serve many more users and customers,” according to the HashiCorp statement. “For our customers and partners, this combination will enable us to go further than as a stand-alone company.”

On March 5, HashiCorp reported a net loss of $48.3 million for its fourth fiscal quarter, using GAAP. The loss was an improvement of about 36 percent year over year.

Some positive measures from the most recent quarterly earnings for the 2024 fiscal year include $583.1 million reported in revenue, an increase of 23 percent year over year. Remaining performance obligation was $775.8 million in the fourth fiscal quarter, up about 20 percent year over year.

HashiCorp has more than 650 systems integrator and reseller partners, according to the vendor. IBM has said it has thousands of partners.

HashiCorp, founded in 2012, has more than 4,000 customers, according to IBM.

McJannet participated in CRN’s CEO Outlook 2024, saying that the growth of AI is an opportunity for cloud adoption and the work of HashiCorp and its partners.

“Channel partners are an important part of how we do this at HashiCorp, and we look forward to continuing this work in 2024,” he said.