Ciscos $28 billion Splunk deal may ignite software deal frenzy
Summary
NEW YORK, Sept 26 (Reuters) - Cisco Systems (CSCO.O) $28 billion deal for Splunk (SPLK.O) 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 companys 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. This underscores how Splunks subscription revenue-focused peers, such as Elastic NV (3E1.F), Datadog (DDOG.O), Crowdstrike Holdings (CRWD.O) and Dynatrace (DT.N), are potential acquisition targets for technology conglomerates such as Microsoft (MSFT.O), Adobe (ADBE.O) and Oracle (ORCL.N), which are grappling with corporate customers seeking to cut spending, the bankers and analysts said. Jefferies analysts wrote in a note the Federal Reserve putting the brakes on interest rate hikes has given acquirers more certainty around their funding costs, helping dealmaking. While its shares had risen 39% in 2023 prior to the deals announcement, they were still down 44% from their October 2020 high, when the COVID-19 pandemic forced companies to spend more on information technology because most of their employees were working from home.
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