On Thursday, Cisco finalized its largest acquisition, buying US cybersecurity software company Splunk in a $28 billion cash deal.
Cisco’s stock lost 3.89% to $53.34 per share on September 21. However, industry watchers predict it will rebound by 0.11% to $53.40 apiece at the start of the next session.
The $157.00 per share cash purchase will help Cisco ease dependence on its massive networking equipment business. Moreover, it will reinforce the tech giant’s software business and artificial intelligence (AI) development.
Named after the activity spelunking, Splunk specializes in mining customer data for insights, focusing on security vulnerabilities. Earlier this year, it introduced several AI-based services to improve its detection speed and response time.
Cisco CEO Chuck Robbins emphasized that the synergy between the two companies gives them a competitive advantage in AI-enabled security. After all, Splunk has established itself as a global leader in data observability, helping manage cybersecurity risks and other threats.
Antitrust scrutiny remains the biggest hurdle in the two companies coming together. If the deal falls through, Cisco has agreed to pay Splunk a $1.48 billion termination fee.
Scott Herren, CFO of Cisco, expressed confidence that regulatory approvals won’t be a problem. He elaborated that they won’t even need the approval of the Chinese government, given Splunk’s small-scale operations in the country.
If things go as Herren says, the acquisition will be completed by the end of September.
Splunk Shares Soar After Sale to Cisco
Splunk’s stock lifted 20.77% to close at $144.43 per share after the deal with Cisco became public. The surge was triggered by Cisco’s decision to offer a 31.28% premium on Splunk’s Wednesday close of $119.59 apiece.
Engaging in the merger will allow the cybersecurity company to navigate the industry-wide slowdown caused by the 2023 inflation safely. Additionally, the news of Splunk CEO Gary Steele joining Cisco’s executive leadership team after the acquisition has bolstered stakeholder confidence.
In the fiscal quarter ending July 31, the company recorded a revenue of $3.90 billion, a 16.00% year-over-year gain. Moreover, its $911.00 million revenue for that quarter exceeded expectations.
Market analysts anticipate that with Splunk serving as an observability platform, Cisco can spearhead the next generation of cybersecurity.
