In a landmark move, Cisco Systems announced its acquisition of cybersecurity powerhouse Splunk for a staggering $28 billion, marking the largest technology deal of the year. This strategic acquisition is set to bolster Cisco’s software business and harness the growing wave of artificial intelligence.
The purchase comes as Cisco seeks to diversify its revenue streams and reduce dependency on its extensive networking equipment division, which has grappled with supply chain disruptions and a post-pandemic drop in demand. Chuck Robbins, Cisco’s CEO, emphasized the importance of this merger, stating that it unites two industry leaders in security and observability, domains critical to customers in an era marked by ever-evolving threats.
Splunk is renowned for its data observability capabilities, aiding companies in monitoring cybersecurity risks and other vulnerabilities. The company utilizes a subscription-based pricing model. While discussions between the two firms have occurred in the past, this time, the deal appears to be moving forward.
Cisco’s offer of $157 in cash per Splunk share, reflecting a 31% premium over the stock’s last closing price, has garnered attention. Splunk’s shares traded above $145.04, below the offer price, partly due to concerns about regulatory scrutiny, while Cisco’s shares dipped by 4%.
This acquisition will amplify revenue growth and boost gross margins for Cisco in the fiscal year following the deal’s closure. Splunk, which counts industry giants such as Coca-Cola and Intel among its 15,000+ customers, experienced a surge in revenue growth last year but faced a slowdown in 2023 due to rising interest rates and persistent inflation.