Cisco CEO’s Bold Splunk Remarks On China, AI ‘Lead’ And $4B ARR

From why Cisco’s acquisition of Splunk will help put it at the forefront of AI to whether China needs to approve the $28 billion deal, here are six big remarks from CEO Chuck Robbins.

CEO Chuck Robbins is bullish about the largest acquisition in Cisco’s nearly 40-year history with the acquisition of Splunk for a whopping $28 billion. Robbins expects the deal to be closed on schedule, within 12 months, without any significant regulatory hurdles.

“Look, there’s not any overlap in our portfolios. So we’re not consolidating any industries,” said Robbins during an investor conference call yesterday regarding the Splunk deal.

Robbins explained when he expects product integration will begin, how Cisco will close the blockbuster deal in a timely fashion, Splunk’s ability to leverage Cisco’s global channel ecosystem of partners, and why exactly he pulled the trigger on his company’s biggest purchase ever.

“I’ve always said that we don’t have a size limitation on how we think about M&A,” he said. “We haven’t done a big deal because we had never gained conviction on a big deal.”

Cisco’s CEO spoke to investors and the media alongside Splunk CEO Gary Steele, who will join Cisco’s leadership team and report directly to Robbins when the deal closes. Steele took over as president and CEO in April 2022 during a time of transition at the security and observability company.

Steele said Cisco will bring a “broad channel reach” to Splunk. “Our channel program, while we’ve made tremendous progress, we’re still relatively immature. And connecting to the Cisco channel, we can deliver just a tremendous opportunity to go drive business in many regions and with a broader customer set,” he said. “I couldn’t be more excited about the go-to-market opportunities.”

From why the deal puts Cisco at the forefront of artificial intelligence to whether China needs to approve the $28 billion acquisition, here are Cisco CEO Chuck Robbins’ six boldest remarks that customers, investors and channel partners should know about.

‘We Will Not Need China’s Approval’; Cisco Is ‘Not Consolidating Any Industries’

Look, there’s not any overlap in our portfolios. So we’re not consolidating any industries. I mean, these are complementary technologies.

And candidly, with all the cyber threats that our customers are facing today, this should be viewed as a very positive deal to provide better protection for customers in the United States and around the world. So hopefully, that will become very clear to everyone.

We’ve had a lot of counsel that looked at it and believe that the nine- to 12-month window [of closing the deal] is probably accurate. We don’t see a ton of product or market overlap here. While there will clearly be a regulatory review, we think we can get it through that nine to 12 month window.

Oh, and by the way, just to clarify—we will not need China’s approval.

Background : Getting regulatory approval from China has caused issues, such as long delays, in the past when it comes to large acquisitions. For example, Broadcom is hitting speed bumps to get its $61 billion acquisition of VMware approved by China state regulators. Cisco’s Splunk purchase has been approved by the boards of directors of both Cisco and Splunk. The deal is still subject to regulatory approval from various regions. Cisco wants the deal to close by third quarter 2024.

Cisco-Splunk Product Integration Will Begin On ‘Day One’

I will tell you that from the beginning of our conversations on this, Cisco’s security team is incredibly excited about the opportunity to work with Splunk. And the integration on the product side, we would intend to start that on day one.

Our observability teams were involved in this decision as well. Our teams are super excited.

We have great new leadership in the security business unit. We’ve launched significant innovation this year. If you specifically think about the extended detection and response platform that we went general availability around August 1, if you take that capability and you combine it with the SIM capability that Splunk brings—we believe that we really have the opportunity to predict and prevent threats in the future, particularly when we layer AI on top of on top of all the data.

Splunk Will Add $4B In ARR To Cisco

This deal further strengthens our financial position and accelerates our business transformation. Upon closing, we would expect to add $4 billion in ARR (annual recurring revenue).

In addition, we expect to drive more software sales, and overall TAM (total addressable market) acceleration and expansion.

The combination also supports our commitment to driving long term shareholder value creation. There is no change to our capital allocation strategy. We remain committed to maintaining a strong balance sheet, driving operating leverage, steadily increasing our dividend, and maintaining the current share buyback rate.

I’m also excited about the strong cultural fit between our two organizations. They have incredibly talented teams. And we share deep rooted values around innovation, customer success, trust and transparency and inclusion. Both companies are regularly recognized as great places to work.

Coming together with a shared vision and common beliefs will drive greater innovation for our customers and stronger growth.

Why Splunk Will Be Cisco’s Largest Purchase Ever

I’ve always said that we don’t have a size limitation on how we think about M&A. We want a technology and strategic fit, we want valuation to be right, we want the cultural fit to be right and all of those things are true with Splunk.

We haven’t done a big deal because we had never gained conviction on a big deal. And I can tell you that the work that [CEO] Gary [Steele] has done at Splunk in the last 18 months is exceptional.

The progress they’ve made, the financial aspects of this deal, as well as the strategic fit and the cultural fit, provided our entire team conviction that this was a great thing for us to do. … The combination of Cisco and Splunk further enhances and accelerates our strategy to securely connect everything to make anything possible.

‘We Are Very Well Positioned To Lead’ In AI

In terms of AI, we discussed our huge opportunity in building out AI networks with hyperscalers.

As we mentioned last quarter, we’ve already taken half a billion dollars of orders for AI infrastructure.

There is also a huge opportunity with enterprises to help them responsibly unlock the opportunities that come with AI. Together with our visibility into the data, the substantial scale we bring, and a deep foundation of trust, we are very well positioned to lead in the space.

Cisco-Splunk ‘Will Create An End-To-End Data Platform’

Our combined capabilities will create an end-to-end data platform to enhance digital resiliency. For example, Splunk security capabilities complement our existing security portfolio very well. Through the integration of Cisco’s extended detection and response platform, our vast security insights, and Splunk’s security information and event management offering—we’ll be able to help our customers move from threat detection and response to threat prediction and prevention.

In terms of observability, our complementary capabilities will offer observability for the full IT stack: from the application to the network, across hybrid and multi cloud environments. With this enhanced capability correlated with business context, customers will be able to deliver more reliable and effective application experiences. Together Cisco and Splunk will deliver an end-to-end enterprise grade full stack observability platform.