Topline
Cisco stock slumped Thursday as Wall Street digested its $28 billion acquisition of artificial intelligence-powered cloud and cybersecurity firm Splunk—the biggest acquisition in Cisco’s history.
Cisco announced its largest acquisition ever Thursday.
Key Facts
Shares of Cisco slipped 4% to $53, closing at its lowest price since August 16 and outpacing the S&P 500 and tech-heavy Nasdaq’s 1.6% and 1.8% respective losses.
The slide comes after the highly profitable Cisco announced it would pay a 32% premium for Splunk, which reported a $278 million loss during its last fiscal year, though the deal indicates San Jose veteran Cisco is eager to pursue AI-fueled growth.
Meanwhile, Splunk shares skyrocketed 21% to $144 on Thursday, still shy of the $157 share price Cisco paid for it as the market prices in uncertainty about regulatory or other snags for the transaction.
Cisco is still on the hook for $1.48 billion if the deal is not completed, but it’s “highly likely” the acquisition will go through, according to Rosenblatt analyst Blair Abernethy, upping his price target for Splunk to $157.
Surprising Fact
Thursday was Cisco stock’s steepest loss since April 19.
Contra
Despite the stock’s poor performance, there were plenty of analysts fond of Cisco’s acquisition. The deal “makes sense given Cisco’s history in the networking, security, and observability markets” William Blair analysts led by Jonathan Ho wrote in a note to clients. Wedbush analysts led by Dan Ives called the Splunk takeover a “well-designed strategic poker move that caught the Street off guard to get a great unique software asset at a fair multiple.”
Key Background
The Wall Street Journal reported last February Cisco offered more than $20 billion for Splunk. Named for “spelunking,” or exploring caves, Splunk specializes in optimizing analysis of large data sets, or caves. This deal is by far the largest acquisition ever made by Cisco.
Further Reading
Source: https://www.forbes.com/sites/dereksaul/2023/09/21/cisco-stock-dips-4-after-28-billion-splunk-acquisition/