Cisco, Splunk deal could usher in 'tidal wave' of M&A, Wedbush says
Seeking AlphaSep 21, 2023
Technology giant Cisco agreed on Thursday to buy Splunk, a data-analysis and artificial intelligence-powered cybersecurity company, for $28B in one of the largest business acquisitions of the year and the age of AI.
Splunk's AI-driven technology helps businesses minimize the risk of hacks and fix technical issues faster by monitoring and analyzing their data.
While some analysts are expressing sticker shock at the cost of this historic deal, the purchase price of $157 per share in cash for Splunk is fair, given the company's predicted revenue. Joining forces with a cybersecurity company like Splunk positions Cisco to compete in the space against other tech giants like Google, Adobe, and Amazon. It's a well-designed strategic move.
Cisco is trying to reposition itself from a router and networking equipment maker to a software and recurring revenue player. This kind of challenging pivot won't happen overnight, even by throwing lots of money at the problem. The fact that Cisco has repeatedly missed its profit targets adds another layer of complexity. Time will show if this deal is the right path to moving forward.
AI companies, as is the case in the broader tech industry, are now being swallowed up by corporate giants for the purpose of growing profits. AI image and text generators are expensive due to the amount of data involved, but that doesn't mean the government should allow these behemoths to monopolize the market. This is just the dawn of a new economic era, so regulators should begin working to stop monopolization before it's too late.