Cisco's Blockbuster $28 Billion Purchase of Splunk

Cisco, known for its history of strategic acquisitions, has taken a significant leap by announcing the acquisition of Splunk for a whopping $28 billion. This marks a departure from Cisco's usual avoidance of mega-acquisitions.

With Splunk in its arsenal, Cisco gains access to a robust observability platform that complements its security offerings. This move enables Cisco to assist its customers in comprehending security threats more effectively while also aiding in the analysis of extensive log data, assisting in troubleshooting a wide range of issues within enterprise systems.

Under the terms of this deal, Cisco is offering a premium price of $157 per share, which is a substantial increase considering Splunk's recent stock performance. Splunk's stock price has seen a 52-week low of $65 per share, with most of the year's trading hovering in the high 80s and low 90s, making this acquisition particularly lucrative for Splunk stockholders. Splunk's market capitalization currently stands at slightly over $20 billion.

Both companies' CEOs expressed their excitement about this acquisition. Chuck Robbins, Cisco's CEO and board chair, highlighted the importance of artificial intelligence (AI) in the deal, emphasizing its role in cybersecurity. Robbins stated, "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."

Gary Steele, President and CEO of Splunk, shared his optimism about the merger, emphasizing how it accelerates Splunk's mission to enhance global organizations' resilience and deliver immediate value to shareholders.

Ray Wang, founder and principal analyst at Constellation Research, emphasized the natural synergy between the two companies. Wang highlighted the benefits of combining threat detection, security, AI, and observability, providing customers with improved network security and enhancing Cisco's AI valuation.

This acquisition stands out as the most significant enterprise software deal of the year, overshadowing previous deals like Silver Lake Partners' acquisition of Qualtrics for $12.5 billion in March.

While both company boards have approved the deal, regulatory approval remains a crucial hurdle, given the increasing scrutiny of such deals worldwide. If all goes according to plan, the acquisition is expected to close sometime in the third quarter of the next year.