California-based tech company Cisco Systems, reportedly, made a more than $20 billion bid to take over software company Splunk late last week. Sources with knowledge in the matter said Cisco had made the offer without any solicitation as the two companies are not in active acquisition talks.
Splunk mainly develops software and tools that are used to spot security threats in databases and networks. The company's business faltered in 2020 after its chief executive officer, Doug Merritt, who had run Splunk for the past six years, suddenly announced his resignation. The company's board of directors had assigned Chairman Graham Smith as interim CEO. Splunk has since been looking for a permanent replacement.
After its record high in September 2020, Splunk's stock has plummeted by more than 49% following the management shakeup. The company had attempted to rectify the situation by shifting its focus to other revenue sources, particularly towards cloud services. Smith previously announced that the company would also be launching a new initiative to acquire more government cybersecurity contracts.
In December last year, the company announced that it generated nearly 37% of its total revenue for its latest quarter from its cloud services. The company's revenue for its fourth quarter last year grew by more than 19% when compared to the same period a year earlier.
Cisco, which produces networking equipment, reported an 8% total revenue growth for its latest quarter. The company has steadily been growing its business through a number of acquisitions, including its recent acquisition of network monitoring company Thousand Eyes for $1 billion.
Sources said Cisco is looking to expand its security business by buying out Splunk while also maintaining its focus on selling its networking products and its Webex collaboration software.
Following news of Cisco's bid to acquire the company, Splunk's share price surged by more than 14% in extended trading on Friday. The stock was trading as high as $133.25 per share. It closed at $114.51 per share on Friday, which was 1% down compared to its price at the start of the year. Before the surge, Splunk had a market valuation of around $18.2 billion. The surge sent its valuation to more than $20 billion.
A report from Bloomberg, which cited separate sources, said the companies are no longer engaging in talks about the deal. The same sources said it is not clear if Cisco is still interested in moving forward with its planned acquisition. If the deal pushes, it would be Cisco's largest acquisition to date and larger than its takeover of Scientific Atlanta.
