Cisco’s US$28 billion acquisition of cybersecurity firm Splunk is the largest acquisition in the networking giant’s history. It is now being seen as a clear signpost for the future value of cybersecurity companies worldwide.
The price paid for the 20-year-old San Francisco company represented over 12 percent of Cisco’s US$198 billion market capitalization. The $28 billion acquisition was closed within only six months, at a time when many large mergers are being blocked or delayed by regulators.
“We will revolutionize the way our customers leverage data to connect and protect every aspect of their organization as we help power and protect the AI revolution,” said Cisco CEO Chuck Robbins.
But, while industry commentators are making much of the fact that Splunk has recently started to incorporate artificial intelligence (AI) into its core offerings, the impetus driving the acquisition is undoubtedly Splunk’s existing capacity to provide visibility and real-time security monitoring across an organization’s entire digital footprint. The merger builds on Cisco’s core principle that everything that companies do – including applications, data, devices, people, and places – should be kept under one roof so that it can all be centrally managed.
Cisco has entered the cyber age
By acquiring Splunk, Cisco now aims to bring its core offering into the cyber age, relieving customers of the need to manage a whole range of changing cybersecurity vulnerabilities. In doing so, Cisco plans to be able to offer its corporate clients a one-stop digital shop where all their networking and security needs can be centrally observed and controlled.
Robbins added: “Together, we will deliver unparalleled visibility and real-time insights across an organization’s entire digital footprint – allowing our customers to tackle their most complex challenges while unlocking new opportunities.”
While it is still as yet unclear precisely how AI will be used to enhance and develop this simple paradigm, Cisco hopes that the acquisition will enable it to become a major player in global software. As the acquisition valued Splunk at roughly 30 percent over its previous closing price, the deal initially slightly depressed Cisco stock, although market analysts anticipated a fairly quick recovery.
Longer-term, it remains to be seen how effective the merger will be once Splunk’s software and staff have been fully integrated into Cisco’s main offering. The benefits to Cisco’s clients may be very real, but large technology corporations often find it more difficult to keep pace with rapid and frequently disruptive changes in technology than San Francisco start-ups. This is particularly true of cybersecurity, where an organization’s weakest links are often gullible staff as much as patchy security perimeters. It now remains to be seen whether Cisco’s massive US$28 billion gamble will pay off as hoped.
