Cisco to acquire Splunk in $28B mega deal

Cisco has a reputation of building the company through acquisitions, but it has tended to stay away from the really huge ones. That changed this morning when the company announced it was acquiring Splunk for $28 billion.

With Splunk, it gets an observability platform that could fit nicely into its security business to help customers better understand security threats, while also helping parse oodles of log data to resolve other problems like helping understand system failures or troubleshoot myriad issues across a broad array of enterprise systems.

Under the terms of the deal, Cisco is paying a hefty premium of $157 per share. When you consider that the 52-week low was $65 a share and it has hovered in the high 80s and low 90s much of this year, that’s a big bump for Splunk stockholders and suggests there might have been some competition for the logging giant. The company’s most recent market cap sits at just over $20 billion.

As you would expect, chief executives from both companies were beaming over the deal with Cisco CEO and board chair Chuck Robbins pointing out the AI angle in this deal because these days, there always needs to be an AI angle, in this case with a strong focus on cybersecurity. “Our combined capabilities will drive the next generation of AI-enabled security and observability. From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient,” Robbins said in a statement.

Meanwhile, Splunk president and CEO Gary Steele was gushing about the possibilities of the combined companies. “Uniting with Cisco represents the next phase of Splunk‚Äôs growth journey, accelerating our mission to help organizations worldwide become more resilient, while delivering immediate and compelling value to our shareholders,” he said. The shareholders certainly have to be pleased with this deal.

Ray Wang, founder and principal analyst at Constellation Research, agrees that the companies have the potential to fit well together. “This is about a natural synergy when you can handle threat detection and security with AI and observability,” Wang told TechCrunch.

“Customers get better network security, while Splunk gets a key home and Cisco has a better story that drives AI valuation. So Cisco network telemetry and the Splunk observability platform will give customers a huge view of data,” he said.

In a quiet year for M&A, this deal sticks out as the biggest enterprise software deal of the year by far to this point, more than doubling Silver Lake Partners taking Qualtrics private for $12.5 billion March.

Both company boards have already approved the deal, but it will have to pass regulatory muster, not a given considering the intense scrutiny these kinds of deals are facing across the world. The companies believe if all goes well, the deal will close sometime in the third quarter next year.