- The combination of Cisco and Splunk positions both companies to lead in cybersecurity and observability in the AI era..
- Cisco expects this partnership to accelerate both revenue growth and gross margin expansion.
- Analysts see the acquisition as a “counterattack” against other cybersecurity companies, which could mean more competition in the future.
Over the past 10 months, significant advances in large-scale language models have accelerated the competition between hackers and businesses. On the positive side, cybersecurity companies are increasing their protections as the threat of generative AI becomes clearer. A notable example is the recent deal between Cisco and Splunk, a move aimed at enhancing the former’s software division with advanced AI-driven security technology.
The deal will see Cisco, the world’s largest manufacturer of computer networking equipment, acquire Splunk, a leader in cybersecurity and observability, for $157 per share in cash, for a stock value of approximately $28 billion. corresponds to In other words, Cisco has made its biggest deal yet to deepen its bet on security software.
The announcement was at the top Killed Some of the company’s recent acquisitions Had made It has been gaining traction in the AI and software security space since the beginning of this year. Cisco is essentially betting that Splunk’s data processing capabilities will drive growth and attract new customers. In the AI era.
“We are excited about Cisco and Splunk working together. Our combined strengths will drive Next generation AI-enabled security Chuck Robbins, Cisco Chairman and CEO, said: statement Announcing the contract. “From threat detection and response to threat prediction and prevention, we help organizations of all sizes become more secure and resilient,” he added.
Cisco and Splunk will combine to become one of the world’s largest software companies and accelerate Cisco’s business transformation to generate more recurring revenue. Source: Cisco’s X.com
Frankly speaking, Splunk’s data services: Benefited from the cloud computing and AI boomAnd it provides the kind of customer relationship Cisco is looking for. That’s why Robbins pitched the deal as an opportunity to quickly strengthen Cisco’s offerings in a growing market. As stated, bloomberg, Robins offered a 31% premium to Splunk’s cash stock price, a deal that represented about 10% of Cisco’s $216 billion market value.
The price spooked investors, and Wedbush Securities analyst Dan Ives said the deal would value Splunk at about six times its 2025 sales. However, as Cisco focuses on next-generation AI enablement, Security and observability, Ives said Splunk’s proven and unique platform makes this the right move at the right time. “We believe this is a reasonable multiple for this strategic asset,” he said in a note last week.
Splunk, by the way, was founded in 2003 and is a cybersecurity company that provides software to help businesses manage, monitor, and analyze. machine-generated data Prevent hacking and resolve technical issues. On the other hand, Cisco is a technology conglomerate founded in 1984 and focused on selling telecommunications, networking equipment, and related software.
How does this agreement enhance Cisco’s AI cybersecurity offerings?
First, the acquisition builds on Splunk’s history of helping organizations become more digitally resilient and accelerates Cisco’s strategy to connect everything and securely enable everything. The statement says it will help. “Combining these two established leaders in AI, security, and observability will make organizations even more secure and resilient,” he said.
The networking giant believes the acceleration and adoption of generative AI will The growing threat surface, multiple cloud environments create complexity that organizations have never faced before. “Together, we are building a global security and observability platform that harnesses the power of data and AI to deliver better outcomes for customers and transform industries,” said Gary Steele, president and CEO of Splunk. Build strong leaders.”
Steele also said the partnership with Cisco represents the next phase of Splunk’s growth and accelerates the company’s mission to deliver immediate and compelling value to shareholders while increasing the resiliency of organizations around the world. I believe there is.
“Considering acceleration, Introduction of generative AI, an expanded threat surface, and multiple cloud environments are creating a level of complexity that organizations have never faced before. “Cisco and Splunk are committed to tackling these challenges head-on,” he added.
Specifically, Splunk’s security capabilities complement Cisco’s existing portfolio. “The complementary capabilities of Cisco and Splunk provide observability across hybrid and multicloud environments, enabling our customers to deliver frictionless application experiences that power their digital businesses,” Cisco said in a statement. is written.
Impact on growth
Cisco said the transaction is expected to be cash flow positive and accretive to gross profit in the first fiscal year following closing. Additionally, this is expected to accelerate Cisco’s revenue growth and gross margin expansion. Scott Herren, Cisco’s chief financial officer, said in an interview. bloomberg Splunk is expected to generate $4 billion in recurring revenue.
“This is based on the US$24 billion in recurring revenue of the US$57 billion that Cisco earned last year. That’s the benefit of making this transformation. “It’s increased significantly. So the risk is lower,” he said. It’s unclear whether the partnership will have any regulatory implications, but Cisco hopes to close the deal by the third quarter of next year.
Wedbush’s Ives sees the acquisition as a “shot in the arm” against other cybersecurity companies. Including Zscaler, Palo Alto Networks, and CrowdStrike will face greater competition. He argued that there could be a “big wave” of mergers and acquisitions across a wide range of technology sectors over the next six to nine months, as major companies compete in an arms race on AI and cybersecurity.
