![]() One of the more notable deals involving the FTC is Microsoft's proposed takeover of gaming company Activision Blizzard. The FTC has ratcheted up its scrutiny over mergers and acquisitions to address heightened antitrust concerns. The proposed transaction also needs to clear regulatory hurdles from the Federal Trade Commission (FTC). However, management made it clear that the Splunk deal is not going to affect existing shareholder-value programs such as buybacks and dividend increases. For this reason, the prospects of a big acquisition might spook some investors. Rather, the company is more of a blue-chip name that might attract investors due to its overall healthy financial profile and dividend. Image Source: Getty Images A look underneath the hoodĬisco does not carry the same allure as other high-flying software growth stocks. This all looks good, but there are a number of risks that investors should consider before loading up on Cisco stock. The combination of accelerating revenue, expanding margins, and cost savings are forecast to generate accretive cash flow in the first year following the close of the deal. This likely means that Cisco will employ head-count reductions and eliminate overlapping vendor costs in an effort to trim the combined expense profile. ![]() Management also alluded to the fact that the deal will carry meaningful synergies across go-to-market and product teams. This should be attractive for investors because bolstering its recurring subscription revenue should, in theory, lead to margin expansion. It believes Splunk can add $4 billion in annual recurring revenue to its existing business. Upon announcing its intent to acquire Splunk, Cisco published a presentation on its investor relations site that was filled with helpful takeaways. The strategic rationale makes sense at a high level, and Cisco's management provided investors with some important details around the transaction. Given the increasing demand for cybersecurity applications, Splunk appears to be an attractive target for Cisco as it looks to augment its own offerings. On the other hand, end-to-end security accounts for less than 10% of revenue and grew only 4% during the company's fiscal year, ended July 29. ![]() How can Splunk help Cisco?Īs it stands, almost 70% of Cisco's total revenue is concentrated in one category: secure, agile networks. Let's dig into the specifics of Cisco's proposed deal and see if now is a good opportunity to buy some shares before the deal is finalized. Cisco Systems (NASDAQ: CSCO) recently announced its intention to acquire cybersecurity firm Splunk (NASDAQ: SPLK) for $28 billion. While these transactions have garnered lots of attention, they represent only a small slice of the overall appetite of big tech. In recent months, however, investors have seen the likes of Microsoft, Alphabet, and Amazon invest billions into artificial intelligence start-ups like OpenAI and Anthropic. The last couple of years have been relatively quiet when it comes to high-profile mergers and acquisitions in the technology space.
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