Cisco’s Game Changing $28 Billion Acquisition of Splunk

Cisco is well-known for its strategy of growing through acquisitions, although it typically avoids making extremely large purchases. However, that changed today with the announcement that Cisco will acquire Splunk for a substantial $28 billion.

This acquisition will introduce Splunk’s observability platform into Cisco’s portfolio, offering valuable synergies with its security business. This platform will enable customers to gain a deeper understanding of security threats and efficiently analyze extensive log data to address various enterprise system challenges, including system failures and troubleshooting.

The purchase price for this deal is set at $157 per share, representing a significant premium considering Splunk’s 52-week low of $65 per share. The fact that Splunk’s stock has consistently traded in the high 80s and low 90s this year suggests strong competition for the company. Splunk’s current market capitalization is just over $20 billion.

As is customary in such announcements, both CEOs expressed their excitement about the agreement. Chuck Robbins, CEO and board chair of Cisco, emphasized the role of AI in enhancing cybersecurity, stating, “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, who serves as the President and CEO of Splunk, expressed optimism about the prospective advantages of the merger. He remarked, “The collaboration with Cisco marks the subsequent stage in Splunk’s expansion trajectory, expediting our mission to enhance the resilience of organizations on a global scale, while promptly delivering significant and compelling value to our shareholders.”

Ray Wang, founder and principal analyst at Constellation Research, agreed that the two companies are a natural fit. He highlighted the synergy of combining threat detection and security with AI and observability, stating that it would provide customers with improved network security and offer Splunk a strong home within Cisco, ultimately enhancing Cisco’s AI capabilities.

In a year where mergers and acquisitions have been relatively scarce, this deal stands out as the largest enterprise software transaction to date, eclipsing the earlier acquisition of Qualtrics by Silver Lake Partners for $12.5 billion.