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Cisco signals AI, security drive with $28bn Splunk buy

Christopher Tredger
By Christopher Tredger, Portals editor
Johannesburg, 22 Sept 2023
Cisco will buy Splunk in a $28 billion deal.
Cisco will buy Splunk in a $28 billion deal.

Technology giant Cisco intends to acquire New York Stock Exchange-listed cyber security and observability firm Splunk in a $28 billion (R527 billion) deal touted as the biggest transaction so far this year.

The acquisition is also the largest in Cisco’s near 40-year history, according to Reuters.

In a statement published on its website, Cisco confirms the deal at $157 per share in cash, and said the purchase would create “one of the world’s largest software companies”.

The combined venture is expected to strengthen Cisco’s software business and accelerate its business transformation to more recurring revenue.

Upon close of the deal, Splunk president and CEO Gary Steele will join Cisco’s executive leadership team, reporting to chairman and CEO Chuck Robbins.

Splunk is based in San Francisco, California, and produces software for searching, monitoring and analysing machine-generated data via a web-style interface.

The companies say the acceleration and adoption of generative artificial intelligence (AI), expanding threat surfaces and multiple cloud environments create complexity and the need to better manage and protect data, and extract its value to stay digitally resilient.

The goal is to combine Cisco’s and Splunk's capabilities to advance AI-enabled security and observability. “From threat detection and response, to threat prediction and prevention, we will help make organisations of all sizes more secure and resilient,” says Robbins.

Arthur Goldstuck, MD of World Wide Worx, says the acquisition is all about observability. “That's the ability to see what's going on inside a system without having to open it up, so issues can be identified and fixed quickly.

“Cisco has been building its capacity in this area, buying companies like AppDynamics and ThousandEyes.

“It tried to buy Splunk last year for $20 billion, and the fact that it has paid a 40% premium over that price shows both that Splunk knows what it's worth to Cisco, and that it has become a more profitable company since then.”

Mostly, however, Goldstuck adds, it demonstrates the urgency of covering all observability bases, from application monitoring, to the customer experience.

“Although this isn't an AI play, it feeds into the current AI frenzy, in that the world is about to become more hyperconnected, and data creation is going to accelerate beyond anything we have seen.

“Observability will be a key element of managing and safeguarding businesses and consumers in the ensuing data chaos.

“Of course, AI has to become integral to observability, and here we have not seen Cisco show a strong hand yet. We can perhaps expect more acquisitions in that direction,” comments Goldstuck.

The deal is expected to close by the end of the third quarter of calendar year 2024, subject to regulatory and shareholder approval.