Street View: Cisco making right moves for growth with Splunk buy
22/09/2023 11:10
** Cisco Systems CSCO.O on Thursday agreed to buy
cybersecurity firm Splunk SPLK.O for about $28 bln in its
biggest-ever deal to strengthen its software business and
capitalize on the boom in artificial intelligence
** CSCO up 0.22% premarket after slumping ~4% on Thursday,
SPLK up 0.04% premarket after surging ~21% last session
"THE DEAL MAKES A LOT OF SENSE"
** J.P. Morgan says higher growth outlook for Splunk should
go further in enhancing Cisco's opportunity to deliver long-term
revenue CAGR (compound annual growth rate) of 5%-7% outlined by
co for the medium-term; says CSCO is putting its right foot
forward for growth with Splunk acquisition
** RBC Capital Markets says "the deal makes a lot of sense"
as brokerage sees the potential for synergies between Splunk and
Cisco's security business and the AppDynamics platform
** Needham does not expect a stronger bid; downgrades SPLK
to "hold" from "buy"
** Brokerage does not expect regulatory hurdles and sees the
deal going through given extended time at the negotiating table;
WSJ reported in Feb last year that CSCO made over $20 bln offer
for SPLK
** TD Cowen sees minimal regulatory risk due to the lack of
overlap between the two software portfolios, but brokerage notes
CSCO's AppDynamics offering has some overlap with SPLK's
Observability offerings, but combined, these would represent
"~7% of the total IT Operations Management market"
** Melius Research warns that the large deal puts overhang
on CSCO in terms of execution risk and potential distractions
(Reporting by Reshma Rockie George in Bengaluru)
((Reshma.George@thomsonreuters.com))