Cisco announced Thursday that it will acquire software company Splunk for $28 billion. The deal is the largest ever for the network equipment giant, as the company hopes to capitalize on the artificial intelligence boom to develop more software and cloud businesses.
The major acquisition plan is the latest in a series of recent acquisitions that will see the company reduce its focus on its core network equipment business, which has been hampered in recent years by supply chain crises and increased off-premises cloud adoption. . This year alone, Cisco has acquired four companies, including threat detection platform Armorblox, identity management company Ault, and cloud security companies Valtix and Lightspin.
“From threat detection and response to threat prediction and prevention, we help organizations of all sizes become more secure and resilient,” Cisco Chairman and CEO Chuck Robbins said in a statement. We will do so.” The acquisition is expected to close in the third quarter of 2024, and Cisco will pay $157 per share for Splunk.
The company plans to finance the acquisition with a combination of cash and debt. “Together, we will become one of the largest software companies in the world,” he told analysts on a conference call. According to one source, Splunk would have to pay a $1.48 billion termination fee if the company backed out of the deal. Securities and Exchange Commission (SEC) filings.
Greg Siegfried, deputy analyst at research firm Gartner, told InformationWeek that the pending acquisition fulfills a rumored deal. “They’ve definitely been looking at Splunk for a while,” he says. “Certainly, both can benefit. Cisco is struggling in the software business, and Splunk has the expertise to deliver software. Because we recognize that, it certainly makes sense from a business perspective to start generating more revenue from software.”
Siegfried acknowledged that GenAI’s recent improvement in its position likely prompted the acquisition. “That’s certainly an underlying theme,” he says of artificial intelligence. “And I’m sure both companies have a lot going on. By leveraging his Splunk portfolio, Cisco can get a jump start on AI products.”
“Our partnership with Cisco represents the next phase of growth for Spunk,” Splunk President and CEO Gary Steele said in a statement. accelerates our mission to make organizations more resilient.”
Patrick Moorhead, chief executive officer and chief analyst at Moor Insights & Strategy, said observability was a key factor in closing the deal. “This acquisition makes sense in many ways,” he told his InformationWeek. “This strengthens Cisco’s observability and security capabilities, leading to improved enterprise capabilities. Enterprises want to integrate and manage fewer vendors, and this combination will help them do that. Businesses want simplicity because there are too many enterprise and data vendors.”
The companies said the partnership will enable them to offer more capabilities in AI, security and observability, and the integration will allow them to increase investment in new solutions.
The acquisition was unanimously approved by the boards of directors of both companies. The deal requires regulatory approval. Siegfried said the business areas “just don’t overlap that much” and doesn’t foresee any major regulatory impasse. I doubt this will subject him to as much regulatory scrutiny as the VMware-Broadcom deal. ”