International Business Machines Corp (NYSE:IBM), the technology giant, is set to open trading 10% lower on Thursday after it posted weaker-than-anticipated first-quarter revenue and confirmed plans to acquire HashiCorp.
Sales during the three months came in at US$14.46 billion, a 1.5% year-on-year increase, which undershot Wall Street guidance of US$14.55 billion.
It represents IBM’s third revenue miss in five quarters and comes as clients cut back on discretionary spending, according to the company.
Despite the revenue miss, adjusted earnings per share reached US$1.68 compared to the US$1.60 analysts had forecast.
IBM also revealed its intentions to buy cloud software company HashiCorp for around US$6.4 billion, or US$35 per share.
HashiCorp’s shares rallied 7.75% on Wednesday as reports broke the news and lifted a further 4% to around $33 following the confirmation from IBM after the markets closed.
Should a deal be accepted, IBM sees the acquisition closing by the end of the year, with plans for HashiCorp boss Dave McJannet to work within the software division.
HashiCorp is expected to complement IBM’s US$34 billion acquisition of 2019, Red Hat (NYSE:RHT), the open-source software provider.
Jim Kavanaugh, IBM’s chief finance officer, said: “We see multiple drivers of product synergies within IBM and accelerating growth for HashiCorp.”
He also believes short-term cost synergies will stem from the deal, while CEO Arvind Krishna said a deal would lead to more clients wanting to talk to IBM.