Cisco's $28-billion deal for Splunk is likely to prompt other tech giants to splash out on similar acquisitions.
US$28-billion deal for Splunk is likely to prompt other technology giants to splash out on similar acquisitions of software vendors with predictable subscription revenue, investment bankers and analysts say.
Cisco CEO Chuck Robbins, who has been expanding his company’s services offerings to compensate for its moribund telecommunications equipment business, told analysts that the $4-billion in annual recurring revenue that Splunk would bring from its subscriptions was a key driver behind the deal.
“I think the buyers’ outlook on their own business has really improved from four months ago, and that gives confidence to pull the trigger on transformational transactions,” Chen said in an interview. Splunk’s stock performance made it receptive to a takeover. While its shares had risen 39% in 2023 prior to the deal’s announcement, they were still down 44% from their October 2020 high, when the Covid-19 pandemic forced companies to spend more on IT because most of their employees were working from home. Many of Splunk’s peers have had similar stock performance.
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