Cisco's $28B Splunk Buy May Ignite Software Deals

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Cisco Systems' $28 billion deal for Splunk is likely to prompt other technology giants to splash out on similar acquisitions of software vendors with predictable subscription revenue, investment bankers and analysts say.

Splunk, a cybersecurity and data analytics firm, was in the process of shifting its business model from licensing its software to charging for subscriptions when it announced an agreement last week to sell itself to Cisco, making it the third-largest software acquisition of all time.

David Chen, co-head of global technology investment banking at Morgan Stanley, predicts that a rally in the Nasdaq 100 index this year and market fears of an economic recession receding will embolden technology companies to follow Cisco's example and spend on big acquisitions. Even before Cisco's deal, there were some signs that technology giants had started to eye acquisitions of software firms this year, albeit at a smaller scale. IBM, for example, agreed in June to buy technology spend-management platform Apptio for $4.6 billion.Splunk's stock performance made it receptive to a takeover.

 

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Analysis: Cisco's $28 billion Splunk deal may ignite software deal frenzyCisco Systems' $28 billion deal for Splunk is likely to prompt other technology giants to splash out on similar acquisitions of software vendors with predictable subscription revenue, investment bankers and analysts say.
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