It seems like irrevocable benefits enumerated in corporate bylaws + predecided public-friendly liquidation procedure (i.e. source code / copyright / trademark release) would help fight profit maximization at the expense of product quality.
HashiCorp's financials don't look terrible, so I'm assuming this sale is more about individual holders cashing out?
They don't look terrible now. But otherwise their recent license change and loss of technical founder have caused a bit of a shift in their user base towards open source forks. Which over time might substantially devalue their growth perspective. Any new projects would default to open source tools and not their proprietary thing.
This is also what I see when consulting on Elasticsearch and Opensearch projects. Almost all my recent clients start out with Opensearch these days because it is the open source choice and they are (mostly) in AWS just a few short years after they announced their license change. I'm pretty sure that's going to happen with things like Terraform and Opentofu as well. Anyone considering making similar moves, there's a growing amount of cases where this ends with a fork.
So, yes, this is why they are selling now. Before it turns into a fire sale. To a buyer it might be attractive to milk existing accounts for a while. A smart buyer might even reverse the license change in order to get some prospect of growth and re-absorb the community. But barring that, it's going to be the usual deal of either companies like Oracle or some hedge fund squeezing this thing dry until there's nothing left.
I wonder how we can verify this. If I look at HashiCorp's quarterly results,[1] revenue is up, and they're adding customers, but net dollar retention rate is trending down.
OpenTofu has 3k followers to HashiCorp's 6.9k on Github. The opentofu/opentofu repo has 18.8k stars to 40.9k for hashicorp/terraform. Sentiment on a recent r/TerraForm thread seems decidedly mixed.[2]
Are any of the (edit: other) forks of HashiCorp's viable yet?
[1] https://ir.hashicorp.com/financial-information/quarterly-res...
[2] https://old.reddit.com/r/Terraform/comments/19egjs3/thoughts...
It'll take 3 to 5 years for the pain to be felt and another 3 to 5 years from that point to collapse because most companies will just pay the renewal to buy time to let the rest of the space mature.
Source/bias: I see this happening all the time in the space. I gave a talk about why Terraform is dead and long live Pulumi.
Uh, what?
2023 revenue was 475.89M, gross margin was certainly good with 381.47M gross profit, but then you look at 678.76M of SG&A and then operational losses are (274.3M). Everything else is horrible: -62% operating margin, -22% return on equity, -23% return on total capital, -21% return on invested capital.
And now due to bungling their license change, there are completely open source forks of their two biggest products. Given their pretty flat revenue since the license change they haven't even been able to successfully use the license change to do a short-term squeeze out of their existing customers. They had been growing 72% revenue year over year for the prior 4 years, but they're now only up 16% over the past 4 quarters.
This is currently a value destroying business. If you take the products and the R&D team and throw away the administrative and selling costs and plug it into some much bigger corporations administrative+selling THEN it might look better (but it is more likely to wind up like F-secure ssh vs. openssh and any purchaser is going to grossly overpay -- probably it'll be the best outcome for the shareholders though)
IMO they're a dying company. Selling is a smart move to push their existing customers a cross sale product to close the loss gap. They'll drop 15 to 30% of their staff.
They're not that far from profitability when you realize their staffing cost is high vs the yielding return per employee.