With the $28 billion acquisition of Splunk by network-equipment giant Cisco Systems, Splunk and Cisco aim to develop AI-driven cybersecurity monitoring tools for real-time detection of hacking threats, enabling businesses to prevent cyberattacks from damaging corporate networks.
Splunk, a 20-year-old technology company that has not yet turned a profit, has been pursuing this goal and will benefit from Cisco’s resources, including access to data from Cisco’s extensive customer base, according to Splunk’s CEO, Gary Steele.
Steele stated, “This puts us in a really interesting position.” Cisco’s CEO, Chuck Robbins, added that Splunk’s estimated $4 billion in recurring revenue from product and service subscriptions immediately strengthens Cisco’s presence in the cybersecurity market. Robbins described the deal as “a very good deal, financially.”
Gary Steele, chief executive of Splunk.
Photo: Business Wire
The market for Splunk’s cybersecurity services, known as security information and event management, has grown significantly as other areas of cybersecurity face financial pressure. Large tech companies such as Microsoft and Google have made investments in this sector, with Google’s purchase of Mandiant for $5.4 billion last year.
Mitchell Schneider, a senior principal analyst at consulting firm Gartner, stated, “Cisco is simply following market demand by offering this technology stack.” He also noted that due to Cisco’s limited experience in security operations, they are likely to rely on Splunk’s expertise.
Splunk utilizes various forms of AI in its products for threat detection and management, while Cisco is known for its hardware offerings like routers and switches, although it also provides software products and security services.
Rama Sekhar, a partner at venture-capital firm Norwest Venture Partners, highlighted the significance of data for AI, stating, “AI is nothing without data, and the acquisition of Splunk not only enables Cisco to sell more recurring software, but also moves Cisco out of the plumbing business and into the data business.”
Chuck Robbins, chief executive of Cisco Systems.
Photo: Hollie Adams/Bloomberg News
In July, Splunk announced the incorporation of generative AI capabilities through its suite of software called Splunk AI. This software is designed to analyze data generated by large networks and assist human staff in detecting potential cyberattacks.
Mergers and acquisitions can help reduce the number of vendors offering similar services, but it also carries the risk of limiting security chiefs’ options. To mitigate this risk, security chiefs should negotiate the right to review contracts if a key vendor is being acquired, according to John-Claude Hesketh, CEO at Marlin Hawk. He noted that as the landscape shifts, clients are increasingly asking about their right to exit contracts.
Scott Hawk, Chief Information Security Officer at Velaspan, stated that as cyber consolidation continues, companies are faced with a trade-off between fewer choices and more integrated products and services. He compared the Splunk acquisition to the consolidation that occurred in the telecom industry years ago.
Roger Thornton, co-founder and general partner at venture-capital firm Ballistic Ventures, noted that Splunk’s customers may initially face challenges dealing with a larger company. However, the acquisition could provide stability for Splunk customers given the company’s financial difficulties.
Both Steele and Robbins emphasized that their respective large customers are supportive of the combination of complementary products. Thornton believes that in the long term, the acquisition may increase the likelihood of Splunk’s product line remaining in the market for a significant period. He also anticipates that other rivals may seek acquisitions to stay competitive with the new, larger competitor in the industry.
—Catherine Stupp and Steven Rosenbush contributed to this article.
Write to James Rundle at [email protected] and Kim S. Nash at [email protected]
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