Cisco Systems Inc. made a takeover deal for software maker Splunk Inc. According to people familiar, this would be the largest acquisition by a networking giant.

Some people claimed that the offer was made just recently, and that the companies aren’t currently in active discussions.
If there were a deal, it would surpass the $7 billion purchase of Scientific Atlanta in 2005. The Acacia Communications Inc. acquisition, valued at $5 billion, was the most recent deal.

Splunk is currently looking for a chief executive. This comes after Doug Merritt, who resigned in November after six years of service. The interim CEO was appointed by the company as Chairman Graham Smith, which he still holds.

Splunk shares rose quickly in the pandemic, as did those of many other technology companies with high growth potential. However, they have nearly fallen in half since then.

It’s not clear if Splunk is being tempted by other suitors.

Splunk, founded in 2003, makes software used by companies’ information-technology and security operations to monitor and analyze data.

Cisco is based in San Jose, Calif., and its Chief Executive Chuck Robbins runs it. He sells routers switches, security services, as well as software products like its Webex meeting app. Splunk is already a partner in data security.

Cisco announced in September that it will introduce new financial metrics to show the company’s growing importance of software and revamp its reporting segments to highlight its software business growth.

Scott Herren, Chief Financial Officer at the time, stated that the idea was to show the company’s shift towards software and recurring revenues.

Cisco’s fiscal 2021 total revenue was 30% from software sales. Cisco stated that subscriptions would generate 50% of its annual revenue by fiscal 2025, an increase from 44%. Cisco reported revenue of $49.8billion for the year, an increase of 1% The net income was $10.6 million, down 6%.

Cisco’s interest in the company shows that Cisco — a networking giant who has acquired many smaller companies before — is interested in big deals.

It has the means to do so, with a market capitalization of approximately $230 billion and more cash and short-term investments than $20 billion.

Recently, software has been a major focus of M&A. Many companies in this sector have been bought by private equity firms or other industry players. Citrix Systems Inc. was one of the most recent examples. It was acquired by two private equity firms for $16.5 billion.

Splunk announced in June that Silver Lake, a technology-focused private equity firm, was investing $1 billion in the company in order to support the company’s transformation. Splunk is moving from a traditional software licensing arrangement to a subscription-based cloud model. The news that Splunk had made an investment in cloud-based subscriptions led to a decrease in shares, which was reflected in Friday’s close of trading.

Cisco isn’t the only legacy tech company to make a bold bet on future growth by making an acquisition. In January, Microsoft Corp. agreed to purchase videogame maker Activision Blizzard Inc. at a price of $75 billion. This would be the largest acquisition it has ever made. In December, Oracle Corp. agreed to buy electronic-medical-records company Cerner Corp. for more than $28 billion, in its biggest deal ever.

Cisco will report fiscal second-quarter earnings February 16th, while Splunk will report March 2.