Splunk Inc. SPLK recently announced that it has inked a definitive agreement to merge with Cisco Systems CSCO. Per the deal, Cisco aims to acquire Splunk for approximately $28 billion. The acquisition is set to be completed by the end of the third quarter of 2024.
Cisco aims to enhance its market prospects in the field of network security, and the buyout of Splunk is a significant step in that direction. The merger is expected to boost Cisco’s top line, improve cash flow generation and gross margin.
Splunk holds a leadership position in the cybersecurity domain and is witnessing healthy traction backed by its robust, enterprise-scale portfolio. Its premium security analytics solutions offer real-time operational intelligence by analyzing data. It effectively addresses emerging security threats, monitors key performance indicators of critical IT, and detects cyber-attacks and insider threats in a business operation. Splunk’s rich heritage in innovation and its cutting-edge technology in the security and observability domain will serve as a valuable addition to Cisco's security portfolio.
The rapid proliferation of generative AI and the growing use of multiple cloud platforms are making business operations more complex. Leveraging these advanced technologies, businesses are aiming to enhance their critical decision making and improve commercial outlook. However, in this race to gain a competitive advantage, the industry is also witnessing an expansion in potential security threats. Given this rising complexity in operations, enterprises are seeking a technology that will optimize data management and protection and capitalize on the full potential of data.
By integrating the complementary capabilities in AI, cybersecurity and observability, Splunk and Cisco are aiming to address these concerns. The buyout is expected to accelerate research and development of next-generation solutions that will harness the true value of data and provide enhanced security analytics. That will augment the digital resiliency of devices and applications and match the evolving requirements of businesses across a hybrid and multi-cloud environment.
The combined company will also boost the development of AI-enabled solutions. Splunk possesses a wide array of advanced AI-powered solutions. Splunk AI seamlessly blends automation with human experience, empowering enterprise clients to exercise greater control of AI applications. By leveraging machine learning models, Splunk AI eliminates the burden of manual, repetitive tasks and augments the productivity of organizations’ security and IT teams. Cisco is actively investing in AI and the incorporation of these advanced features will immensely bolster Cisco’s AI-driven service offerings.
The purpose-driven and customer-oriented approach, combined with the collective capabilities of these two entities, will enable organizations of all sizes to effectively leverage the inherent value of data and AI. This will establish robust and secure digital infrastructure through efficient threat detection and expedite response time for threat prevention. It will also improve the decision-making process for mission-critical tasks, deliver superior outcomes and create a foundation of trust industrywide.
The stock has gained 78.3% in the past year compared with the industry’s growth of 25.5%.
Image Source: Zacks Investment Research
Splunk currently sports a Zacks Rank #1 (Strong Buy).
Other Stocks to Consider
Motorola Solutions, Inc. MSI, carrying a Zacks Rank #2 (Buy) at present, delivered an earnings surprise of 5.62%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 5.58%. You can see the complete list of today’s Zacks #1 Rank stocks here.
It provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers. It develops and services both analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets.
NVIDIA Corporation NVDA, currently sporting a Zacks Rank #1, delivered an earnings surprise of 9.79%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 29.19%.
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.
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