Cisco Bets Big on Cybersecurity With Its Splunk Acquisition -- Is the Stock a Buy?

▤ Summary

It just announced it intends to acquire Splunk (SPLK 0.06%), which specializes in data log analysis and cloud observability software, for $28 billion in cash. It was a pioneer of analytics with its log management software pre-dating the cloud era, but numerous cloud-native peers (like Datadog and my personal fave, Dynatrace) have popped up in recent years with technology stacks and pricing better suited to modern needs. As I wrote about a few weeks ago, Cisco has been slowly making a transition from its traditional network-infrastructure prowess (selling more than $34 billion in network and internet hardware in fiscal 2023, 60% of its total sales) by peppering in more software subscriptions. Splunk will immediately catapult Ciscos cybersecurity unit into high gear, as the formers data logs and observability software have morphed into a type of security service in recent years. Bear in mind Splunk is a sizable purchase, and that $28 billion price tag will weigh on Cisco net income (since amortization expense related to part of the acquisition will be realized over time).

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