Cisco struck a deal to buy cybersecurity firm Splunk for about $28 billion – its biggest deal ever – in a bid to add more recurring software revenue to its bottom line and increase the company’s AI-based data analysis capabilities.
A representative for Cisco confirmed to Mobile World Live (MWL) the Splunk deal was its largest since the company was founded in 1984. The previous record was a $7 billion acquisition of set-top box maker Scientific Atlanta in 2006.
Cisco stated it will pay $157 a share for Splunk, with the purchase slated to close in its fiscal Q3 next year (ending 27 April.)
Chuck Robbins, CEO for Cisco, has spent the past several years moving the company away from solely relying on network gear revenue to a re-occurring software-based model.
Splunk offers a security information and event management (SIEM) platform that organisations use to detect threats before they disrupt their businesses.
“This deal will boost its recurring revenue significantly,” Scott Raynovich, founder and principal analyst at research company Futuriom, told MWL. “But the SIEM market is evolving fast and Spunk’s approach may soon seem antiquated. Cisco’s going to be milking a legacy market.”
Buying Splunk will beef-up Cisco’s software business and expand its use of AI [1].
“Cisco and Splunk are two leaders with complementary capabilities across AI, security, and observability, and together we will help make organisations of all sizes more resilient and secure in an AI-powered world,” Robbins stated in a blog.
The deal will blend the companies’ AI and security capabilities to help make organisations “more resilient and secure in an AI-powered world,” Robbins added.
If Cisco backs out of the deal, or is forced to do so because of regulatory concerns, it will pay Splunk a termination fee of $1.48 billion, according to a regulatory filing. Splunk could pay a $1 billion breakup fee to Cisco if it backs out of the agreement.
Both boards have approved the deal. Splunk CEO Gary Steele will join Cisco’s executive leadership team and report to Robbins.
The Wall Street Journal reported in 2022 that Cisco made an offer of more than $20 billion to buy Splunk but was rebuffed.
[1] https://www.mobileworldlive.com/featured-content/top-three/analysis-top-ai-takeaways-from-cisco-live/
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