Multinational tech company International Business Machines Corp. (IBM) confirmed Wednesday plans to purchase HashiCorp Inc. for a staggering $6.4 billion. 

This acquisition aims to bolster IBM's prowess in cloud-based solutions, particularly as the demand for AI-powered technologies continues to surge.

IBM Acquires HashiCorp

The acquisition, valued at $35 per share for HashiCorp, represents a substantial 42.6% premium over Monday's closing price, Reuters reported.

HashiCorp, based in California, specializes in cloud infrastructure automation, providing clients with tools to manage their cloud environments efficiently.

Following the announcement, HashiCorp's shares surged over 4% in extended trading, reflecting investor optimism in the deal's potential synergies, according to the report. 

Last month, VCPost reported a 12% surge in shares following reports that the software developer was contemplating a sale.

However, IBM saw a 7% dip in its shares post-announcement, coupled with first-quarter revenue slightly below estimates at $14.46 billion compared to analyst projections of $14.55 billion.

IBM's CFO Jim Kavanaugh noted the challenging economic climate.

"You're seeing clients in this uncertain macroeconomic environment," Kavanaugh told Reuters. "You're seeing clients that are tightening discretionary spending."

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IBM's Strategic Rationale, Future Prospects

Stephen Elliot, a vice president at International Data Corp, expressed that the acquisition is strategic for IBM, noting that it aligns with their existing portfolio and positions them as a leader in the industry.

The acquisition aligns with IBM's overarching strategy to strengthen its foothold in the cloud computing market and cater to evolving client needs in AI and hybrid cloud solutions.

HashiCorp's automation technologies, including Terraform for infrastructure provisioning and Vault for secure secret management, are anticipated to integrate seamlessly with IBM's offerings, enhancing its hybrid cloud capabilities..

The acquisition is expected to close by the end of 2024 pending shareholder and regulatory approval. This transaction marks IBM's third major acquisition this year, according to Network World.

READ MORE: IBM Set to Acquire HashiCorp in Possible Mega-Deal, Stock Skyrockets 24% to $6.1 Billion Valuation