By Arsheeya Bajwa

April 24 (Reuters) - International Business Machines ( IBM )

will buy HashiCorp ( HCP ) in a deal valued at $6.4

billion, the company said on Wednesday, expanding its

cloud-based software products to tap into an AI-powered boom in

demand.

Software has been a bright spot for IBM ( IBM ) as its consulting

business grapples with more cautious spending by enterprises

navigating higher interest rates.

IBM ( IBM ) will pay $35 per share for HashiCorp ( HCP ), a 42.6% premium to

Monday's closing price. HashiCorp's ( HCP ) shares surged on Tuesday

following media reports of the deal talks.

IBM ( IBM ), which separately reported first-quarter adjusted profit

above Wall Street estimates, has doubled down on its cloud

business as it becomes increasingly necessary to store and

process the vast amounts of data employed in artificial

intelligence programs.

The Big Blue's "AI book of business" crossed $1 billion in

the first quarter, growing sequentially. The book comprises

actual sales and bookings from various offerings.

The acquisition will be funded by cash on hand and will add

to adjusted core profit within the first full year of closing,

expected by the end of 2024.

California-based HashiCorp ( HCP ) allows customers to establish and

manage their infrastructures on the cloud.

"The deal provides a cloud infrastructure automation growth

engine for IBM ( IBM )," Stephen Elliot, a vice president at market

research firm International Data Corp, said on Tuesday,

following reports of the talks.

The deal is a great complement to IBM's ( IBM ) Red Hat business,

Elliot added.

Software revenue grew 5.5% in the first quarter while the

consulting segment was flat. Total revenue of $14.46 billion

fell just short of LSEG estimates of $14.55 billion.

"You're seeing clients in this uncertain macroeconomic

environment. You're seeing clients that are tightening

discretionary spending," CFO Jim Kavanaugh told Reuters.

Accenture ( ACN ) had cut its fiscal-year 2024 revenue

forecast in March as clients curbed spending on its consulting

services.

The company reported adjusted earnings of $1.68 per share

for the quarter ended March, compared to analysts' average

estimate of $1.60.