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Splunk deal to allow Cisco to reduce dependency on hardware business, says GlobalData

October 2023 by GlobalData

Cisco has a strong position in computer networking, but its growth has stalled due to both the weakness of its telecom operator customers as well as the shift of enterprise IT to the public cloud, where it enjoys a less dominant position than in the traditional enterprise. Against this backdrop, the $28 billion acquisition of Splunk will allow Cisco to reduce dependence on its legacy hardware equipment business and further enhance its cybersecurity capabilities, says GlobalData, a leading data and analytics company.

GlobalData predicted that Splunk would be a key takeover target in 2023 and that Cisco was one of the potential acquirers in its report, ‘Mergers And Acquisitions In Tech, Media, And Telecom (TMT) 2022 Themes – Thematic Intelligence’.

Priya Toppo, Analyst, Thematic Intelligence at GlobalData, comments: “Cisco’s acquisition of Splunk is likely to be a game changer that underlines its strategy to shift from hardware-centric to software-centric. This software acquisition will help in further reducing Cisco’s dependency on its legacy hardware equipment business, which still accounts for the majority of revenues but is a lower growth and margins business. This business segment has also suffered supply chain disruption and a post-pandemic slump.”

Splunk’s leadership in security information and event management means that it will further enhance Cisco’s cybersecurity capabilities. Splunk’s strengths lie in harnessing data and AI capabilities to deliver stronger cybersecurity solutions for clients.
According to GlobalData’s ‘Cybersecurity – Thematic Intelligence’ report, cybersecurity will continue to be a top priority for enterprises and operators. GlobalData predicts that cybersecurity revenues will reach $344 billion worldwide by 2030. Moreover, software-based cybersecurity products will be the largest market segment, contributing 44% of total revenue in 2030.

Toppo concludes: “However, the future of the Cisco-Splunk deal is still uncertain. The deal’s success will be based on how effectively Cisco and Splunk execute their vision and harness their strengths in the AI era. And given the greater interest in tech M&A deals, this deal may still catch the eye of regulators such as the Federal Trade Commission as well as the European and UK authorities.”

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