Who Will Cisco Buy? Sources Say a Big Deal is Near

Several industry sources – many of them reliable – have pinged me this week to say that Cisco has a “big deal” brewing. It’s in the final stages, they tell me.

The timing of a deal looks interesting, with the valuations of high-value software companies – exactly the type of company that Cisco needs -- having been reset much lower by rising interest rates. Cisco, on the other hand, has a huge market cap ($180 billion) and a decent cash pile to deploy ($19 billion).

So let’s go! What’s the deal? The two companies that have come up several times include Splunk (current market cap: $12 billion), and Hashicorp ($4 billion). Both these deals make sense because Cisco has been rumored to be looking at them before. It also makes sense that Cisco would come back to the table after the general market deflation.

The notion of Splunk at $20 billion seemed odd when it was floated earlier this year, but Splunk stock has been hammered and at the current $12 billion valuation, you’d have to revisit. Splunk has a large installed base, $3 billion in revenue, a nascent cloud subscription platform, and a data analytics business that feeds into many security services that Cisco could probably leverage. I see how the bean counters could get together and agree that you could shave enough cost off the money-losing Splunk and get it churning out profits again in a year or so. The stock is 60% below its 52-week high. It’s plausible, but also kind of meh.

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