The logo of Cisco Systems is seen at the 2023 Hannover Messe industrial trade fair on April 17, 2023 in Hanover, Germany.
Cisco, a leading provider of networking equipment in Silicon Valley, has announced the historic $28 billion purchase of cybersecurity company Splunk. The action aims to strengthen Cisco's security defenses against possible attacks, especially given the rising use of artificial intelligence (AI).
The tech firm will formally confirm its commitment to cybersecurity and AI-driven security solutions by paying $157 per share to Splunk Inc.
Cisco will add Splunk CEO Gary Steele to its senior leadership team following the purchase. A regulatory filing states that Cisco and Splunk would incur $1.48 billion and $1 billion in termination expenses if they discontinued the deal for any reason.
Chuck Robbins, Chairman and CEO of Cisco, highlighted the complementarity of their skills by saying, "Our combined capabilities will drive the next generation of AI-enabled security and observability. From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient," as quoted by AP News.
The acquisition will likely be finalized by the end of the third quarter of 2024 if Splunk shareholders approve and both companies' boards approve, according to Fox Business.
Analysts Weigh in
Analysts' thoughts on the merger have been divided, and some have highlighted worries about possible product overlap, regulatory scrutiny, and the acquisition price. Recently, Splunk has changed its emphasis from on-premise solutions to cloud-oriented products, raising concerns about the company's direction.
Business analysts like Dan Ives of Wedbush see this strategic shift favorably and highlight Cisco's emphasis on the observability and security offered by AI. Ives said that Splunk's distinctive platform is compatible with Cisco's goals and is a major strategic move in the field of cybersecurity. With this purchase, Cisco declares its intention to take on major competitors, including Palo Alto, Checkpoint, Crowdstrike, Microsoft, and Zscaler.
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Gary Steele, CEO of Splunk, and Robbins justified the decision by highlighting the ongoing value of customer-managed environments for many major customers.
"We still have many large customers who are very dependent upon the capabilities that we allow for in a customer managed environment," Steel remarked, as quoted by CNBC.
Cisco's Aggressive Purchasing
Splunk specializes in cybersecurity solutions that let businesses monitor and analyze their data to reduce the risk of hacking and quickly fix technical problems. Cisco, in contrast, produces and markets networking and telecommunications hardware as well as complimentary software programs.
In 2023, Cisco has acquired four businesses: Armorblox, Oort, Valtix, and Lightspin. The purchase of Splunk ranks among Cisco's largest acquisitions to date. The company was advised by Tidal Partners, Simpson Thacher, and CSM. Slate, Meagher, & Flom, Morgan Stanley, and Qatalyst Partners assisted Splunk.
Cisco's shares dipped 4% after the purchase was announced, while Splunk's gained almost 20%.
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