The networking equipment company
Cisco Systems
said it would acquire
Splunk
for $157 a share in cash in a deal with an enterprise value of about $28 billion.
“We’re excited to bring
Cisco
and Splunk together. Our combined capabilities will drive the next generation of AI-enabled security and observability,” said Cisco CEO Chuck Robbins in a news release. “From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient.”
Cisco (ticker: CSCO) shares were down 3.3% to $53.67 in morning trading, while Splunk (SPLK), a cybersecurity and data analytics software firm, surged 21% to $144.91. It closed Wednesday at $119.59.
Trading in Splunk’s peers was mixed.
Okta
(OKTA) gained 0.4%,
Zscaler
(ZS) and
Palo Alto Networks
(PANW) both fell 1.7%,
MongoDB
(MDB) was down 2.1%, and
CrowdStrike
Holdings (CRWD) gained 2.4%.
Cisco said the acquisition is expected to be cash-flow positive and to boost gross margins in the first fiscal year after it closes. It should add to adjusted earnings in the second year. The transaction is also expected to boost Cisco’s revenue growth and help to expand its gross margins.
The acquisition was unanimously approved by the boards of both companies and is expected to close by the end of the third quarter of 2024. It won’t affect Cisco’s previously announced share buyback program or dividend plans, the company said.
“Cisco acquiring Splunk. This is an easy one,” wrote Patrick Moorhead, founder of Moor Insights & Strategy on X, formerly known as Twitter. “Will create an observability capability and an even bigger security giant.”
Wedbush analysts also were upbeat about the deal.
“For Cisco this is a shot across the bow at Palo Alto, Checkpoint, Crowdstrike,
Microsoft,
Zscaler
and others that the tech stalwart is not sitting idle in this market and now is making an aggressive play to gain market share in the coming years,” the analysts wrote.
They predicted more mergers and acquisitions in the tech and software arena.
“For Robbins and Cisco there is a window of opportunity to make sure that Microsoft, Google,
Oracle,
Amazon,
Adobe,
IBM
and others do not own the next wave of AI driven software/cyber security and this was a well-designed strategic poker move that caught the Street off guard to get a great unique software asset at a fair multiple,” they said.
Write to Emily Dattilo at emily.dattilo@dowjones.com
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