Cisco’s $28B Splunk Buy: 5 Huge AI, Security, Software Things To Know

“We’re bringing together two powerful innovation engines to create one of the world’s largest software companies, and together we will help make organizations more resilient and secure in an AI-powered world,” said Cisco CEO Chuck Robbins.

Cisco Systems is shaking up the IT landscape today with its blockbuster $28 billion acquisition of Splunk, the largest acquisition in the networking giant’s history.

The San Jose, Calif.-based company has massive plans for Splunk—from transforming Cisco into a software subscription company, to driving the “next generation of AI-enabled security and observability” for organizations across the globe, says Cisco CEO and chairman Chuck Robbins.

“This is truly a historic day for Cisco,” said Robbins in a blog post today. “Together, we will bring trusted innovation leadership, an outstanding go-to-market engine, and a world-class culture that will help our customers move with greater speed to rapidly unlock new opportunities ahead.”

Cisco touts Splunk—which in its fiscal 2024 second quarter achieved an annual revenue run rate that exceeds $3.64 billion—as a worldwide leader in cybersecurity, software and observability.

Before jumping into Cisco’s integration plans and strategy for Splunk, let’s first look at the terms of the deal.

Cisco plans to acquire San Francisco-based Splunk for $157 per share in cash. This share price represents approximately $28 billion in equity value. The acquisition has been unanimously approved by the boards of directors of both Cisco and Splunk.

Cisco said it plans to close its $28 billion acquisition of Splunk by the end of the third quarter of calendar year 2024. The deal is still subject to regulatory approval and needs the approval by Splunk shareholders. Cisco said the transaction is expected to be cash flow positive and gross margin accretive in the first fiscal year post-close. Additionally, Cisco said Splunk will accelerate Cisco’s revenue growth and overall gross margin.

Here are the five biggest things customers, channel partners and investors need to know about Cisco’s historic acquisition of Splunk: from where CEO Gary Steele will end up to integration strategies.

Cisco’s Biggest Acquisition Ever; Marks Tenth Purchase In 2023

The $28 billion price Cisco is spending on Splunk is the company’s largest ever. This says a lot since Cisco was founded nearly 40 years ago in 1984.

Some of Cisco’s largest acquisitions over the decades include:

* StrataCom for $4 billion in 1996

* Cerent for $6.9 billion in 1999

* Arrowpoint Communications for $5.7 Billion in 2000

* Scientific Atlanta for $6.9 billion in 2005

* WebEx for $3.2 billion in 2007

* Tandberg for $3.3 billion in 2010

* NDS Group for $5 billion in 2012

* AppDynamics for $3.7 billion in 2017

* Acacia Communications for $2.6 billion in 2019.

Over the past few years, Cisco has not disclosed the purchase price for most of its acquisition. However, it is safe to say that no purchased over the past several years has come close to Splunk’s $28 billion price tag.

In 2023, Cisco has aggressively pursued acquisitions. In fact, over the first nine months of this year, the company acquired a whopping nine companies. Of those deals, four were focused on security, several were around network performance, along with a networking startup and an identity threat protection and response company.

Cisco-Splunk To Unlock ‘The True Value Of Data’ For Customers; Boost Threat Detection And Response

Together, Cisco and Splunk will elevate their customers’ use of data and cybersecurity posture in today’s complex and data-driven world.

“The combination of Splunk and Cisco will help businesses move from threat detection and response to threat prediction and prevention, making organizations of all sizes more secure and resilient,” said Chuck Robbins in his blog post.

Every organization is relying on data to run their business and make critical decisions every day, Cisco says. Factoring in the acceleration and adoption of generative AI, expanding threat surfaces, and multiple cloud environments, the complexity level is unprecedented. Cisco said one main reason for its acquisition of Splunk is to help organizations better manage, protect, and unlock data’s true value.

“Customers need a better way to manage, protect, and unlock data’s true value while staying resilient and secure in a world that is constantly changing,” said Robbins.

Cisco’s CEO said the Cisco Security Cloud has visibility into vast amounts of security data—such as network data, identities, emails, web traffic, endpoints and processes. “With Splunk, Cisco is adding one of the world’s best data platforms to Cisco’s robust security portfolio,” he said.

Splunk’s security capabilities complement Cisco’s existing portfolio and together will provide top-notch security analytics and coverage from devices to applications to clouds.

Cisco-Splunk ‘Will Drive The Next Generation Of AI-Enabled’ Tech

Cisco’s CEO said generative AI is rapidly transforming industries and creating new opportunities.

“Together, Cisco and Splunk see a broad range of data across applications, security, and the network,” said Robbins (pictured). “Our combined capabilities will drive the next generation of AI-enabled security and observability.”

Cisco together with Splunk aims to address complexity challenges and create opportunities for organizations around the world by offering best-in-class technologies to protect, connect, and advance their goals.

“With the scale we bring and a deep foundation of trust, we believe we’re very well positioned to provide customers visibility to their data and enable them to take advantage of the many opportunities with AI,” said Robbins.

On the AI front overall, Robbins said the combined companies will help customers make sense of what’s happening in their infrastructure, make decisions and act on insights quickly, and help secure their data and their entire enterprise, “all in one place”.

Splunk CEO Gary Steele: Cisco Merger Represents ‘The Next Phase Of’ Splunk

Gary Steele (pictured) took over as president and CEO of Splunk in April 2022 during a time of transition for the unified security and observability platform develop. He joined Splunk following the sudden resignation of CEO Doug Merritt in November 2021 after Splunk had struggled through a revenue decline and periods of negative operating cash flow in fiscal 2021 at the height of the pandemic.

Since taking the reins at Splunk, Steele has installed a new leadership team, worked to improve efficiency and business execution, and has accelerated sales.

For its recent second quarter 2024, Splunk reported revenue of $911 million, up 16 percent year over year.

“Together, we will form a global security and observability leader that harnesses the power of data and AI to deliver excellent customer outcomes and transform the industry,” said Steele in a press release. “Uniting with Cisco represents the next phase of Splunk’s growth journey, accelerating our mission to help organizations worldwide become more resilient, while delivering immediate and compelling value to our shareholders.”

Cisco’s Robbins said he was “thrilled” that Splunk’s CEO will join Cisco’s Executive Leadership Team, reporting directly to him.

Splunk Will ‘Accelerate’ Cisco’s Internal Business Transformation

One of the main goals in Cisco’s acquisition of Splunk is to help Cisco transform itself into a more software subscription and recurring revenue company - a transformation Splunk has recently undergone. The longtime networking market share leader has had a highly successful history in network infrastructure dating back to the 1980s. Over the past ten years, Cisco has shifted its business and innovation engine more towards software and as-a-service offerings.

“ Over the past few years, Cisco has been transforming our business to deliver more software and subscriptions, while still delivering best-in-class, high-performance hardware,” said Robbins.

Splunk’s annual recurring revenue was $3.39 billion as of its fiscal 2024 second quarter, up 16 percent year over year.

“With Splunk joining Cisco, we will accelerate our business transformation, which will allow us to put innovation in the hands of our customers faster, provide greater predictability and visibility in our business, and help drive growth and long-term shareholder value,” said Cisco’s CEO.

Cisco said Splunk will accelerate the company’s revenue growth and overall gross margin thanks to its software and subscription go-to-market.