Cisco beefs up cybersecurity play with $28 billion Splunk deal
By Yuvraj Malik and Aditya Soni
(Reuters) — Cisco Systems (NASDAQ:CSCO) has agreed to buy cybersecurity firm Splunk (NASDAQ:SPLK) for about $28 billion in its biggest-ever deal to beef up its software business and capitalize on the rising use of artificial intelligence, the companies said on Thursday.
The deal will help reduce Cisco's reliance on its massive networking equipment business, which has suffered in recent years from supply chain issues and a post-pandemic slowdown in demand.
Cisco offered $157 in cash for each share of Splunk, representing a 31% premium to the company's last closing price.
Splunk shares jumped 23% to trade $9 short of the offer price before the opening bell, while Cisco dropped nearly 5%.
«Combined, Cisco and Splunk will become one of the world's largest software companies and will accelerate Cisco's business transformation to more recurring revenue,» a joint statement said.
Cisco already has a data-security partnership with Splunk, whose more than 15,000 customers include many prominent companies such as Coca-Cola (NYSE:KO), Intel (NASDAQ:INTC) and Porsche.
After a surge in revenue growth last year to nearly 40%, Splunk has grappled with an industry-wide slowdown in demand in 2023 wrought by rising interest rates and sticky inflation.
Its acquisition will accelerate revenue growth and gross margin expansion at hardware-reliant Cisco in the first fiscal year after the deal's close, according to the companies.
Cisco had also made a more than $20 billion approach for Splunk in 2022 but that fell apart, the Wall Street Journal had reported.
«Cisco bought a good synergistic business at a good price. It's a win for both parties,» said Thomas Hayes, chairman of hedge fund Great Hill Capital.
Read more on investing.com
