After a surge in revenue growth last year to nearly 40%, Splunk has grappled with an industry-wide slowdown in demand in 2023 wrought by rising interest rates and sticky inflation.
Its acquisition will accelerate revenue growth and gross margin expansion at hardware-reliant Cisco in the first fiscal year after the deal's close, according to the companies. Cisco had also made a more than $20 billion approach for Splunk in 2022 but that fell apart, the Wall Street Journal had"Cisco bought a good synergistic business at a good price. It's a win for both parties," said Thomas Hayes, chairman of hedge fund Great Hill Capital. "This will give Cisco an edge in AI-enabled security moving forward."
The overlap in the security business could, however, invite antitrust scrutiny. One analyst also raised concern about the "underwhelming" transition to the cloud at Splunk. The deal, which was unanimously approved by the boards of both Cisco and Splunk, is expected to close by the end of the third quarter of 2024, subject to regulatory approvals. It will not require China's nod.Tidal Partners, Simpson Thacher & Bartlett and Cravath, Swaine & Moore were advisers to Cisco. Qatalyst Partners, Morgan Stanley & Co, and Skadden, Arps, Slate, Meagher & Flom advised Splunk.
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