Splunk, Inc.SPLK recently acquired a machine learning and analytics services provider - Caspida, Inc. for $190 million. The news boosted investors' confidence as reflected in the 4.12% rise in share price in Friday's trading session.
Per the deal, Splunk will be paying $127 million in cash and about $63 million in restricted securities. The company will be bearing the expense organically. As of Apr 2015, Splunk had cash and cash equivalents of $413.5 million. The acquisition is expected to dilute its employee retention incentives and total equity consideration by 1% in 2015.
Splunk expects the acquisition to generate revenues from 2016 onwards, once the technologies of the two entities are integrated.
This deal significantly strengthens Splunk's cyber security offerings. Caspida has made a name for itself in using machine learning to automatically detect threats, which when coupled with Splunk's extensive data management portfolio can significantly improve security offerings.
Cyber security has become a major problem for all institutions both in the private and government space. Lately, a large number of attacks have gone undetected because they were made using trusted credentials. Moreover, the increasing adoption of "Internet of Things" has exposed networks and devices to such attacks.
According to research firm, MarketsandMarkets, the cyber security market is expected to touch $170.21 billion by 2020 from $106.32 billion in 2015, growing at an annual growth rate of 9.8%.
We believe that the addition of Caspida's capabilities will place Splunk in a favorable position in the cyber security market with an advanced and comprehensive product portfolio.
Also, the move comes at an opportune time when other bigger players in the market including International Business Machines IBM and Oracle ORCL are also vying for an increasing share of the booming cyber security market.
Currently, Splunk has a Zacks Rank #3 (Hold). Five9, Inc. FIVN is a better-ranked stock in the space, sporting a Zacks Rank #1 (Strong Buy).
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