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HashiCorp stock rises, users' hearts fall on sale report

HashiCorp could be an enticing asset for a large IT vendor. But a sale wouldn't necessarily be great news for customers who value the neutrality of its cloud-native apps.

Seven years after its founding, HashiCorp stock hit the market in a $14 billion IPO in 2021. But the years since haven't been as kind to the purveyor of cloud-native apps, and it is now reportedly considering a sale.

Bloomberg reported March 15 that HashiCorp is holding exploratory talks with potential buyers, citing anonymous sources and without naming potential suitors. HashiCorp's stock has fallen 67% since its IPO, according to Google Finance, but rose 11% in after-hours trading following last week's report, according to Bloomberg.

The vendor has been the subject of intense scrutiny since August 2023, when it revealed plans to move to a business source license (BSL) for future releases of its cloud-native apps. This drew an outcry from the open source community and prompted forks of two of its most popular products, Terraform infrastructure as code and Vault secrets management.

"It would be an amazing acquisition for any of a dozen different businesses," said Andi Mann, global CTO and founder of Sageable, a tech advisory and consulting firm in Boulder, Colo. "It should open a pretty interesting bidding war, I expect. As a strategic asset in that space, HashiCorp is going to be hard to beat for breadth and depth."

Almost any of HashiCorp's major partners, which include Microsoft Azure, Google Cloud, AWS, Red Hat, ServiceNow, Palo Alto Networks and GitHub, could potentially be interested in buying the company, Mann said. The probable exception is Cisco, which is currently incorporating Splunk.

"I do not see it as super attractive for a hyperscaler. But it's certainly possible an ITSM [IT service management] vendor, new or old, buys in to get an instant market lift and help to modernize their portfolio," Mann said. "Similar reasoning could apply to a performance [management] or cybersecurity vendor. HashiCorp has some excellent cybersecurity assets, like secrets management."

A purchase of HashiCorp by one of the big cloud vendors would be the worst-case scenario for one HashiCorp Ambassador.

Kyler Middleton, senior principal software engineer, VeradigmKyler Middleton

"HashiCorp's primary value comes from their cross-platform approachability and open approach," said Kyler Middleton, senior principal software engineer at healthcare tech company Veradigm. "If they get purchased by Google or Microsoft, I think there is a significant risk of that company hampering or chilling the development of this cross-platform tool."

Another HashiCorp user said his fear is that what has happened to VMware licensing under Broadcom could happen to HashiCorp if it is bought -- especially if it's actually bought by Broadcom.

"We're just hoping it is not Broadcom, but it also wouldn't be a surprise if it is," said Rob Lazzurs, CTO at Amach Software, a digital transformation consultancy in Dublin, Ireland. "It's hard to see a good way out right now for [HashiCorp]. They have the best cloud management technology around, but funding and scale are going to be challenges for them in the near future."

Mann said he's sympathetic to the users' points of view.

"Personally, I'd like to see [HashiCorp] ride it out. … They have enormous upside, especially in the midst of the AI revolution," he said. "And in the end, I do not know whether this will be good for customers and users in general, especially whether the acquirer will accelerate innovation or stifle it. That all depends on where it lands."

Still, if HashiCorp wants to keep gaining new customers, it would likely be more successful doing that as part of a broader sale by a bigger vendor, said Tim Crawford, CIO strategic adviser at Avoa, a research and advisory services firm in Rolling Hills Estates, Calif.

"I do think that HashiCorp should look for an exit," he said. "Their technology is solid. However, they have struggled to escape being a technology sale. … Historically, they have had a collection of tools without [a unifying] thread to pull through them."

HashiCorp sale speculation could boost OpenTofu

A HashiCorp sale could also potentially be a boon to its competitors and to the OpenTofu Terraform fork project, Mann said. The open source fork of Terraform has already quickly gained momentum since it was adopted by The Linux Foundation in September 2023. This week, the Cloud Native Computing Foundation hosted an OpenTofu Day event co-located with KubeCon + CloudNativeCon EU.

It's hard to see a good way out right now for [HashiCorp]. They have the best cloud management technology around, but funding and scale are going to be challenges for them in the near future.
Rob LazzursCTO, Amach Software

"At very least, it will be a massive gift to OpenTofu and its member orgs, just at a critical time for them to prove their claims and show their value," he said. "Also likely a major boost to competitors like Harness, as M&A often is. I'd definitely advise both to ramp up their take-out campaigns if this happens."

Lazzurs said he's already helped some of his clients transition from Terraform to OpenTofu.

"For the others, it's the same outlook we took with Broadcom/VMWare: to wait and see," he said. "We have migration patterns ready for clients if it becomes a business issue for them."

Reports of a possible sale also might give potential IT buyers pause in the short term, Middleton said.

"Companies are pretty worried about the [BSL] change. They're not sure if they should commit to a new product like OpenTofu or if they should stick to a tool, which might change its license again, like Terraform," she said. "Rumors of a sale are going to make companies even more concerned about using tools from HashiCorp. … I don't think companies are going to be making any moves today, but I know lots of companies are starting to look around at their options in case this goes bad."

Beth Pariseau, senior news writer for TechTarget Editorial, is an award-winning veteran of IT journalism covering DevOps. Have a tip? Email her or reach out on X, formerly known as Twitter, @PariseauTT.

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