Cisco makes largest ever acquisition buying cybersecurity firm
Cisco is acquiring cybersecurity software company Splunk for $157 per share in a cash deal worth about $28 billion, the company said Thursday, in its largest acquisition ever.
As of Thursday morning, Splunk shares were up 21%, while Cisco shares were down 4%.
Splunk’s technology helps businesses monitor and analyze their data to minimize the risk of hacking and resolve technical issues more quickly. As the world’s largest provider of computer networking equipment, Cisco has bolstered its cybersecurity business to meet customer demands and drive growth.
In his remarks, Cisco CEO Chuck Robbins stressed the importance of artificial intelligence and how Splunk’s technology uses AI to protect networks.
The two companies’ combined capabilities will drive the next generation of AI-enabled security and observability, Robbins said. Our goal is to make organizations of all sizes more secure and resilient by detecting and responding to threats, predicting threats, and preventing them.”
Cisco expects the deal to close in the third quarter of 2024, and it expects to improve gross margins in year one and non-GAAP earnings in year two.
This purchase represents 13% of Cisco’s market cap, a big number for a company that has avoided blockbuster acquisitions in the past. Cisco’s largest deal prior to Splunk was the $6.9 billion acquisition of cable set-top box maker Scientific Atlanta in 2006. Approximately $100 billion was Cisco’s market cap at the time.
Cisco has needed to find new and big revenue streams as the public cloud has absorbed more of its traditional back-end business. One of the biggest bets has been cybersecurity.
Cisco changed the name of its core switching and routing business from Infrastructure Platforms to Secure, Agile Networks in fiscal 2022, emphasizing the importance of network security. Its security products are grouped under a separate reporting unit called End-to-End Security.
During the fiscal year ended July 29, revenue in the core business increased 22% to $29.1 billion, while sales in the security unit grew 4% to $3.9 billion.