Amidst the technological integration that has been taking place, Cisco has leveled up the game as it announced to buy Splunk for $28 Million on Thursday.
The deal has broken records and gained the title of “biggest-technology transaction of the year”. On September 21, this settlement was made between Cisco CEO and board chair Chuck Robbins and Splunk President and CEO Gary Steele. Both of the chief executives are beaming for this acquisition as the main purpose of this integration is to build the next generation of AI-enabled security and observability.
Cisco has a reputation for building a company with acquisitions, not really large ones, however, this deal of Silicon Valley to acquire analytics and artificial intelligence-powered cybersecurity firm Splunk has turned the tables, making one of the largest transactions of 2023 and the AI era.
Cisco is one of the largest and most profitable tech firms around the globe sharing a market capital of $225 Billion as of the Wednesday close and a net income of $12.6 Billion during the last financial year. On the other hand, Splunk, which commenced in 2012, reported a $63 million loss last year. Before the deal was announced, Splunk’s stock had risen almost 40% this year, thanks to investors’ enthusiasm for AI, but it’s still down almost 50% from its highs in 2020.
According to the agreement, Cisco will pay a substantial premium of $157 per share. Splunk’s 52-week journey showed a high of $65 per share and it was trading in the 80s and 90s most of the year. This shows a great bump for Splunk Stakeholders.
As of Thursday, Cisco has fallen 4% in premarket trading while Splunk has a surge of 20%. The deal was quite shocking but the majority of the people are looking forward to it as it shows that the AI revolution has changed the game. Moreover, Thomas Hayes, chair of hedge fund Great Hill Capital said, that it is a win-win game for both parties. Cisco bought a good synergetic business at a good price. This will also give Cisco an edge to move forward as an AI-enabled security.
Additionally, both of the company owners are hopeful for the success of this deal and gushing about the possibility of combining the companies. Talking with the analyst, Robins pledges, Together, we will make the biggest software company globally. Meanwhile, Splunk President and CEO Gary Steel stated that integrating with Cisco represents the next phase of Splunk’s journey, accelerating our mission to help organizations worldwide become more resilient while delivering immediate and compelling value to our shareholders,”
However, some analysts also raised questions and concerns about the product overlap, regulatory scrutiny, and the price Cisco paid. Some share their views positively while some say Splunk’s pivot to the cloud has been “underwhelming.”
Well, the deal has been made, but still, it has to pass regulatory scrutiny. The companies believe that if everything goes well the deal will be closed in the third quarter of next year. Let’s watch what this integration brings to the table!