Forget about reopening the IPO window. The really important news this week might be the return of tech M&A.
It would be the networking firm’s largest acquisition, eclipsing the $6.9 billion purchase of the cable set-top box maker Scientific Atlanta in 2005 and a deal of the same size for the optical networking firm Cerent in 1999. The deal will boost Cisco’s security business, which generated $3.8 billion in revenue in the latest fiscal year, accounting for about 9% of product revenue.
The deal is subject to regulatory review in the U.S. and Europe, but the two companies have little product overlap in a highly competitive market for security and observability software. Herren says the review process should be “relatively straightforward.” And with minimal exposure to China, the deal won’t be subject to review there.
It has long been speculated that Splunk could be a good fit with Cisco. In February 2022, The Wall Street Journal reported that Cisco had offered to buy Splunk for more than $20 billion, but that the companies weren’t in active talks. “While Cisco’s stock is down slightly after the announcement, we believe that with Splunk’s cleaned up income statement, this acquisition isn’t going to be a big headwind for Cisco financially,” Moerdler writes.
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