Splunk stock jumps 20% on Cisco deal

Splunk Inc (NASDAQ: SPLK) opened more than 20% up on Thursday after Cisco Systems Inc (NASDAQ: CSCO) said it will buy the cybersecurity firm for about $28 billion.

Cisco values Splunk stock at $157

The all-cash deal values each share of the Nasdaq-listed firm at $157.

Cisco expects this transaction to be accretive to its gross margin and be cash flow positive in the first year after closing. Chuck Robbins – its Chief Executive said in a press release today:

From threat detection and response to threat prediction and prevention, we will help make organisations of all sizes more secure and resilient.

From the second year, the digital communications technology company says the acquisition will benefit its adjusted earnings as well. Splunk stock is now up 65% versus the start of 2023.

Cisco has been on a buying spree this year

Cisco expects to complete this agreement in the third quarter of 2024. It does not see a need for regulatory approval for the acquiree’s business in China. Its CEO Robbins also said today:

Together, we will become one of the largest software companies globally.

The California-based company has been on a buying spree this year – having acquired four other companies already over the past nine months. It is convinced that this fifth deal will not affect its previously announced dividend and share repurchase programme.

Last month, the tech giant reported strong results for its fiscal fourth quarter (read more). Wall Street currently has a consensus “overweight” rating on Splunk stock.