VENDORiQ: Cisco to Purchase Splunk for US$28 billion

Why It’s Important

IBRS believes that the acquisition deal, being a cash buy, will substantially use up Cisco’s free cash reserves. This raises concerns about Cisco’s future financial flexibility, especially in funding new product development and research efforts. However, it should be noted that Cisco is projected to earn over US$10 billion before the deal’s final closure.

The merger promises mutual benefits: Splunk will be able to leverage Cisco’s underutilised but robust AI capabilities, enhancing its observability functions. On the other hand, Cisco can bridge its existing gap in handling large data sets, and take it into a market area where it has traditionally not been strong.

Who’s Impacted?

• CISO

What’s Next?

• Watch the pricing space. There are signs that customers of Splunk are reducing their commitment based on the cost of the product. Cisco is unlikely to change Splunk’s income focus in the near term. However, overall pricing may be lowered to retain market leadership as the deal settles. 
• Existing Splunk customers may want to review Cisco’s security offerings. Cisco, in a post-deal closure, may be amenable to attractive pricing to switch other security products to offerings from the enterprise.

Related IBRS Advisory

1. Sourcing Monthly July 2023

2. Sourcing Monthly June 2023