Cisco acquires Splunk for $28 billion. What you need to know

Cisco has announced a definitive agreement to acquire Splunk, a company specialising in digital resilience, for $28 billion in cash or $157 per share. Cisco’s largest deal to date, it is expected to be finalised by the end of the third quarter of 2024. With the acquisition, Cisco plans to accelerate its strategy aimed at offering secure connections, combining security, observability and Artificial Intelligence (AI). Splunk’s technology helps companies monitor and analyse their systems for cyber security risks and other threats.

“We are thrilled to join Cisco and Splunk, whose combined capabilities will drive the next generation of AI-powered security and observability. From threat detection and response to attack prediction and prevention, we will help organizations of all sizes become more secure and resilient,” says Chuck Robbins, president and CEO of Cisco.

“Together, we will form a global leader in security and observability that will use the power of data and AI to deliver outstanding customer outcomes and transform our industry. We’re excited to join forces with a long-standing, trusted partner who shares our passion for innovation and the customer experience,” adds Gary Steele, Splunk’s president and CEO.

In his blog, Robbins emphasises that this is a historic moment for Cisco and that, in recent years, the company has been transforming its business to offer more software and subscription models, as well as best-in-class high-performance hardware. “By joining Cisco, we will accelerate this transformation, which will allow us to get innovation into the hands of our customers faster, provide greater levels of predictability and visibility to our business and help generate more value for shareholders in the long term,” he explains.

Upon completion of the acquisition process, Gary Steele, president and CEO of Splunk, will join Cisco’s executive leadership team, reporting to Chuck Robbins, president and CEO of Cisco.

In the view of both companies, with the rapid adoption of generative AI, the expansion of threat surfaces and multiple multi-cloud environments, the level of complexity is something different from what organizations have faced so far. That’s why they need a better way to manage, protect and unlock the true value of data and remain digitally resilient. The complementary capabilities of Cisco and Splunk will offer observability in hybrid and multi-cloud environments, giving customers better experiences with digital applications.

The acquisition was unanimously approved by the boards of directors of Cisco and Splunk. The purchase process is expected to be completed by the end of the third quarter of 2024, subject to regulatory approval and other customary conditions, including the approval of Splunk.

A change of scenery

As Chuck Robbins said on his blog, for Cisco, this acquisition represents a great moment, a strategic realignment in a company that has always been synonymous with network equipment and now wants to associate its name with security and observability, more than just network equipment.

Two points highlighted at the investor conference were the influence on annual recurring revenues and the implications for the go-to-market strategy. The acquisition promises to inject an impressive $4 billion into Cisco’s software business. In addition, the combination of Cisco’s global reach with Splunk’s channel network is a good sign that the desired results will be achieved or even surpassed.

In the field of Artificial Intelligence, a Forbes article points out that Splunk has already incorporated AI into its core offerings, while Cisco highlights recent $500 million orders for AI solutions. “However, AI should serve as an enriching component rather than a cornerstone in this acquisition, complementing the main points of security and observability without overshadowing them,” comments Steven Dickens, vice president and practice leader at Futurum Group and Forbes contributor as an analyst of the technology landscape.

In Dickens’ view, the acquisition can be seen as a highly calibrated and aggressive move by Cisco that addresses diversification, competitive positioning and alignment with current technological trends. It demonstrates the company’s willingness to adapt and significantly streamline its business model. “The coming months will reveal the effectiveness of this union, but this acquisition already has the potential to reshape the industry’s architecture in a transformative way,” the analyst points out.

By the way: before the Splunk acquisition, Cisco’s biggest deal was the purchase of Scientific-Atlanta for $7 billion in 2006, which represented just 7 per cent of Cisco’s market value at the time.