Cisco to Buy Splunk for $28 Billion in Giant AI-Powered Data Bet
Cisco Systems Inc. agreed to buy Splunk Inc. in a deal valued at about $28 billion, representing its biggest acquisition yet and a massive push into software and artificial intelligence-powered data analysis.
The networking giant will pay $157 a share in cash, the companies said in a statement Thursday, or a 31% premium to Splunk's closing price on Wednesday. The purchase represents roughly 10% of Cisco's market value.
Under Chief Executive Officer Chuck Robbins, Cisco has been trying to lessen its dependence on one-time sales of expensive hardware and shift toward software and services. Splunk is its most expensive push yet into that area and will help Cisco reach a broader base of customers, who can use the new services to gain insight into their network and computing operations.
The deal should be cash-flow positive in the first year after closing and add $4 billion in annual recurring revenue, Cisco Chief Financial Officer Scott Herren said on a conference call with analysts Thursday. The companies expect the acquisition to be completed by the end of the third quarter next year.
Splunk, based in San Francisco, is known for data observability services, which allow companies to monitor internal systems for network health, cybersecurity risks and other insights. It competes with companies like Datadog Inc. and Dynatrace Inc. The deal is a bet on information technology departments increasing their investment in data management services, driven in part by economywide excitement in artificial intelligence.
“The IT landscape is changing faster than we've ever seen — with hyper-connectivity, AI and increasing cyber threats, the value of data only increases, and that's why this deal makes sense,” Robbins said on the conference
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