Cisco to Acquire Splunk, Accelerating AI-Enabled Security and Observability.

Last Thursday, Cisco announced its plan to acquire Splunk, a well-known company in the field of data observability and security, for approximately $28 billion. Cisco intends to purchase Splunk shares for $157 per share in cash. This is the largest deal in Cisco's history and aims to drive the development of next-generation AI-enabled security and observability solutions. These solutions will not only enable threat detection and response but also threat prediction and prevention. Furthermore, Splunk's technology helps enterprises monitor and analyze network security risks and other threats to their systems. Cisco primarily focuses on manufacturing computer networking equipment, and its business line has recently faced an increasing number of supply chain attacks. Through this acquisition, Cisco hopes to reduce its long-term reliance on manufacturing computer networking equipment and strengthen its network security and AI commitments to meet customer demands and drive growth. The transaction is expected to be completed in the third quarter of 2024. Although the boards of directors of Cisco and Splunk have reached an agreement, the transaction still requires regulatory approval and the consent of Splunk shareholders. Assuming the deal is completed, Gary Steele, CEO and President of Splunk, will join Cisco's executive team. According to The Wall Street Journal's report in February 2022, Cisco expressed interest in acquiring Splunk last year. This news led to an increase in Splunk's stock price. For both Cisco and Splunk, the benefits of this acquisition lie in gaining new sources of revenue and security innovation. Cisco states that the merger will accelerate its revenue growth without affecting its previously announced buyback and dividend plans. This acquisition is driven by the changes in Cisco's industry. The increasing influence of public cloud has had a significant impact on Cisco's legacy technologies, necessitating the exploration of new revenue sources. Therefore, Cisco has identified network security as a key area for growth and investment to adapt to and address the ever-changing industry dynamics. This is also good news for Splunk, as the company has faced significant challenges in cloud innovation for its security information and event management platform in recent years. Prior to this Splunk news, Cisco's largest deal was the $7 billion acquisition of Scientific-Atlanta in 2006, a leading provider of cable set-top boxes, end-to-end video distribution networks, and video system integration, which accounted for only 7% of Cisco's market value at the time. Cisco Chairman and CEO Chuck Robbins stated in a press release about the transaction, "We are excited to combine Cisco and Splunk. Our combined capabilities will drive the development of next-generation AI-enabled security and observability. From threat detection and response to threat prediction and prevention, we will help organizations of all sizes become more secure and resilient." Steele from Splunk expressed in the press release that this decision is necessary for the company's growth journey. "The merger with Cisco represents the next phase of Splunk's growth journey, accelerating our mission to help global organizations become more resilient while providing immediate and attractive value to shareholders. Together, we will become leaders in the global security and observability space, leveraging the power of data and AI to deliver excellent results for customers and change the industry." Some industry experts have reacted to the news of Cisco and Splunk. They have expressed concerns about how the technologies of both companies will integrate and their capabilities in areas such as AI and SIEM cloud. Neither Cisco nor Splunk is considered key players in the AI field, and Splunk is not well-equipped in SIEM cloud automation. In a statement provided to TechRepublic, Adam Geller, CEO of cloud-native SIEM platform Exabeam, said, "We believe this is a good outcome for Splunk. They have struggled with achieving cloud-native capabilities, and their innovation velocity has slowed. This acquisition may be their best way forward. Today's cybersecurity customers demand innovation in cloud-native solutions in this AI-driven era, especially when over 90% of enterprises are using the cloud instead of on-premises solutions." In a LinkedIn post, Rob Strechay, Chief Corporate Technology Analyst at SiliconANGLE Media, stated that despite this transaction combining SIEM and extended detection and response into a more comprehensive platform, challenges remain in AI integration and progress. "Splunk and Cisco lag behind in using AI, and their current product architectures are not conducive to gaining a competitive advantage immediately, especially compared to certain independent and hyperscale security competitors," Strechay wrote. Impact on the Future of SIEM and SOC Teams According to MarketsandMarkets, the global SIEM market is projected to reach $5.5 billion by 2025. While Cisco and Splunk may have complementary capabilities covering the security analytics field, they still face some challenges. A survey conducted by Gurucul at the 2023 RSA Conference with over 230 security professionals revealed that SIEM users still face many challenges that affect SIEM adoption. Over 42% of respondents encountered difficulties when adding new data to SIEM tools, a process that sometimes takes days, weeks, or even months. This indicates that SIEM vendors still struggle to effectively achieve reliable automated data ingestion capabilities in their solutions. Nearly 23.6% of survey respondents revealed that they use third-party automated data source mapping tools to import data into their SIEM solutions. Additionally, approximately 17% of respondents expressed uncertainty about whether SIEM solutions can help them detect unknown threats. These survey results indicate that the SIEM market still has a long way to go. Therefore, regardless of who acquires whom, vendors that can address most or some of these challenges have the opportunity to succeed in the SIEM market.