The Californian Cisco Systems is often described as a bulimic company, due to its history of growth to 214,000 million in stock market value through the acquisition of smaller companies, no less than 245 purchases since 1984. It may not be exceptional in the industry technological, but in its case it is systematic: over the years, this rhythm has allowed it to gradually change its business model. It remains the leading seller of equipment for business networks (switches and routers), the majority of its revenue, but has been taking positions as a software provider. This evolution leads to the recurring revenue formula, with a growing flow of subscriptions.
So far in 2023, Cisco has closed a dozen acquisitions, half of them specialized in cybersecurity, which is already a trend. The last of these acquisitions until further notice, the September purchase of Splunk, is also the most expensive in its history, for which it will pay $28 billion without the need to go into debt. Splunk expects to earn around 3.8 billion this year. When the transaction is approved by regulators, no earlier than a year, Cisco will add 6% to its total turnover and double that of its End-to-end Security division.
It’s not the first time Cisco CEO Chuck Robbins has tried it. A year and a half ago, he sent Splunk a purchase offer for $20 billion, which was rejected. With the acceptance of the new amount, he will be able to integrate it into what he calls his unified offer – observability security – relying on artificial intelligence. This will be a long-awaited reinforcement in the conversion of its business model in which preference is given to recurring subscription income, which is practiced by both parties. In fact, a trait that has been adopted by virtually the entire software industry.
The agreement will result in a fusion of SIEM (Security Information and Events Management) technology, a technical name that in the sector is equated with the prosaic observability.
Robbins has pointed out that the objective of the acquisition is to absorb the Splunk platform, its main asset, with some 230,000 end users around the world, to complement other tools in its portfolio, from previous acquisitions.
Observability is a descriptive word, useful to understand the reason for the transaction and its amount. The concept has been incorporated into the usual jargon in cybersecurity, a sector rich in acronyms and acronyms. From its oldest version, EDR (network access point detection and response), to the most modern SIEM, which has a forensic component. It is a market, cybersecurity, of multiple dimensions and highly competitive, with demand that does not let up.
Splunk’s technology is complementary to what Cisco presented last June and is comparable to what is known as “data mining”: it is responsible for identifying behavioral patterns, translating them into metrics, and diagnosing problems that are not evident. The company markets two products: one that helps organizations fortify their digital defenses and mitigate risks; the other – observability itself – that gives visibility to the set of infrastructures, applications and user experience.
“With the hyperconnectivity of today’s world,” Robbins commented in the presentation to analysts, “security threats can only increase, continually increasing the value of data.” This is their justification for the 28 billion.
