Cisco Systems announced Thursday it will acquire cybersecurity company Splunk in an all-cash deal valued at around $28 billion. The acquisition, Cisco’s largest ever, aims to expand its presence in the security software market and boost recurring revenue streams.
Under the agreement, Cisco will pay $157 per share to buy Splunk, representing a premium of over 20% to Splunk’s recent stock price. Splunk shares jumped 21% on the news, while Cisco stock slipped nearly 5%.
The network gear giant has been on an acquisition spree lately to grow its software offerings. Splunk provides data analytics software and services focused on security, internet of things and infrastructure monitoring.
Cisco CEO Chuck Robbins said Splunk’s data capabilities combined with Cisco’s network telemetry presents an opportunity for more AI-enabled security solutions. The deal is expected to close in late 2024 after clearing regulatory approvals.
Cisco aims to leverage Splunk’s analytics tools to improve threat detection and better predict cyber risks. Splunk’s software is used by over 9,000 customers including over 90 of the Fortune 100. The acquisition provides Cisco an avenue into more subscription-based software sales.
The company said it expects the deal to be cash flow positive and accretive to gross margins within the first year post-closing. Cisco forecasts the acquisition boosting adjusted earnings per share starting in the second year.
Splunk CEO Gary Steele will join Cisco’s executive leadership team once the merger is finalized and report directly to Robbins. Together the companies aim to become a leading force in security infrastructure.
The acquisition reflects Cisco’s ongoing shift toward software and subscription revenue. It provides both an expanded customer base and advanced analytics capabilities around security, core focuses for Cisco. The company will fund the sizable purchase through cash reserves and new debt financing.