Cisco Systems (CSCO) will buy cybersecurity software company Splunk (SPLK) for $157 per share in cash, or approximately $28 billion🉐 in equity value, in a move that analysts see as an "aggressive strategic p🦩lay in cybersecurity."

What Is Cisco Getting From The Deal?

Analysts at Wedbush Securities said this deal was "a shot across the bow" by Cisco to prove to its rivals such as Microsoft (MSFT), Google (GOOGL), Oracle (ORCL), Amazon (AMZN), Adobe (ADBE), IBM (IBM), Crowdstrike (CRWD) and Zscaler (ZS) that it is very much in 🐎the market for AI-driven so꧂ftware.

"This was a well-designed strategic poker move that caught the Street off guard to get a great unique software asset at a fair multiple," wrote Wedbush analysts in a note Thursday morning.

Cisco shares dipped almost 4%, while Splunk shares rose more than 21% in early trading Thursday as the deal price presented an almost 31% premium over Wednesday's close.

In its fiscal second-quarter results, Splunk reported revenues of $911 million, with cloud revenue growing 29% to $445 million. The company has 15,000 customers and said operating expenses declined 2% year-over-year while operating cash flow of $827 million was up 247% year-over-year.

In July, Splunk unveiled new AI offerings and partnered with Microsoft to provide enterprise security products on the latter's Azure cloud platform.

Under the terms of the acquisition, Splunk President and CEO Gary Steele will join Cisco's executive team reporting to Chairman and CEO Chuck Robbins. The transaction is expected to be cash flow positive in the first fiscal year, while also accelerating revenue growth and gross margins at Cisco.

Takeover talk has been circling San Francisco-based Splunk since October 2022 when it was announced that the activist investor Starboard Value LP had amassed a 7.8% stake in the software firm.

Wedbush Securities analysts led by Dan Ives said this was a "monster deal" that could start a "tidal wave of software M&A."