President, Chief Executive Officer & Director, Splunk
Cisco CEO Chuck Robbins, Former Splunk CEO Gary Steele Talk Cisco/Splunk Deal | Bloomberg Talks
Cisco completed the acquisition of Splunk on Monday, setting the foundation for delivering unparalleled visibility and insights across an organization's entire digital footprint. Cisco CEO Chuck Robbins and former Splunk CEO Gary Steele talk about the deal with host Katie Greifeld.
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About Gary Steele
Gary Steele, President, CEO, and Director of Splunk, has been focused on the company's integration with Cisco following its acquisition, emphasizing the combined entity's role in digital resilience. At the Cisco Partner Summit in November 2024, Steele stated that organizations must keep systems running to serve customers, noting that "the cost of downtime's insane." He also said there will be "more investment in security" as digital footprints grow, calling security a "massive opportunity" that "creates billions of dollars of economic opportunity." In a January 2025 interview, Steele attributed the swift regulatory approval of the Cisco-Splunk deal to a lack of product overlap and the companies' ability to "do a lot for customers from a cyber perspective." Steele has also addressed the cybersecurity landscape and the impact of AI. In December 2024, he said that "the cyber threat actors continue to up their game" and that "AI is a great advancement for everyone, but it's also an advancement for threat actors," predicting that the situation will "get worse, not better" in 2024. He noted that cyber budgets will likely increase due to new SEC rules requiring public companies to report material breaches within four days. At Splunk's .conf24 in June 2024, Steele described AI as "probably the most transformative technology that we will see in our lifetimes" and stated that the company's mission is "delivering digital resilience across your entire digital footprint."
Transcript (28 segments)
I
Interviewer0:02
Bloomberg audio Studios podcasts radio news. Well, Cisco announced today that it completed its $28 billion acquisition of Splunk, its biggest deal ever. Now these two software companies are joining forces to power, protect, and advance the AI revolution for their customers. And I'm pleased to say that joining me now we have Cisco CEO Chuck Robbins, as well as former Splunk CEO Gary Steele in studio with me. Great to see you both.
C
Chuck Robbins0:27
It's good to be here.
G
Gary Steele0:28
Good to be here.
I
Interviewer0:29
So number one, congratulations. Number two, let's talk about the timeline here because this deal was only announced in September, and you think about the appetite for these deals coming through and then getting blocked, how were you able to secure approval so quickly?
C
Chuck Robbins0:44
It was primarily Gary's charm that made it all happen. I think, look, hats off to our legal teams who did an amazing job providing clarity. I think it's also reflective of the fact that we didn't have a lot of overlap in the portfolios. I think two other things: number one, I think there's a general understanding—we actually helped, we tried to help the regulators understand that from a cyber perspective, which is super important, this is going to be good for customers. And I think it also speaks to the reputation that both companies have with governments around the world. Anything you'd add to that?
G
Gary Steele1:18
No, I think that sums it up well.
I
Interviewer1:20
Gary, since you were the charming one in this deal according to Chuck, I mean, do you think that this signals that maybe scrutiny is lessening a little bit, or was this really about specific factors related to this deal?
G
Gary Steele1:31
I think it really was related to the specific factors on this deal. I think as Chuck described, there really was no product overlap, and collectively we can do a lot for customers from a cyber perspective. So I think there was good agreement on that.
I
Interviewer1:47
And I want to talk a little bit about your timeline specifically because you were named the Splunk CEO in March 2022, you took over in April 2022. How long into the job did you and Chuck start talking?
G
Gary Steele2:00
So Chuck and I first met at Davos a year ago, and that was our first time that we had the opportunity to meet. And I had prior to that worked with the CFO of Cisco, Scott Heron, so we had a prior relationship—he was on my board at an earlier company. So there were some good things, but it took a while. The conversations went well, we took it slow, we were very thoughtful about the process, and from my perspective, I wanted to make sure I was doing the right thing for our shareholders.
I
Interviewer2:30
And we're going to get into integration and product fit here, but I want to talk a little bit more about Splunk because it had long been rumored as a takeover target. You had the likes of Starboard, Hellman, and Friedman taking stakes in the company. Did you entertain any other bids in addition to what you got from Cisco?
G
Gary Steele2:47
So if you go back and look at our proxy that we filed, Cisco was really the only party that we were talking to at the time. But I would say we had incredible support from our board members that were private equity firms, both Silver Lake and Hellman and Friedman, and Starboard was always a very supportive relationship.
I
Interviewer3:07
And let's talk a little bit more about this marriage. Chuck, where do you see Splunk really fitting in with the product and also the financial strategy?
C
Chuck Robbins3:16
Yeah, I think there are two big areas. There's an emerging area called observability, which is effectively trying to help our customers understand application performance, what's going on in their technology infrastructure, particularly in this world where you have hybrid cloud, multi-cloud, private cloud, SaaS. So that's one big area. And then the other big area is cybersecurity. If you think about the utilization of AI by the bad actors, we're going to have to do a better job of doing real-time analytics and real-time detection and response. In my view, we have to be able to take three or four different things that we're seeing happening at the same time, and those three or four independently might not indicate a problem, but together there's a problem. Their data platform with our detection response capabilities and all of our endpoints and all of the sources of threat intelligence that we have, and our massive amount of Intel that we see on a daily basis, we think brings our customers the ability to actually do that in real time.
I
Interviewer4:20
And of course, when you talk to the sell side, there's also this narrative out there that you're trying to remake Cisco as a provider of networking services, really trying to lessen your reliance on one-time sales of equipment. How do you see this deal pushing that effort forward?
C
Chuck Robbins4:34
Well, that's an accurate narrative. So we have been moving into more software. I think the three metrics I would share: last quarter we hit a milestone that we had set to try to get to 50% of our revenue coming from recurring revenue, and we did that last quarter, which is a big move from eight years ago. The other thing is, combined, Gary and the team bring $4.2 billion of ARR growing in mid-teens, 15% close to the end of the year, and combined we have ARR now of almost $29 billion. And we're over $20 billion from just software sales in the company now, which is when we add Splunk software sales to it. So I think we've made a lot of progress and we're going to continue marching down that path.
I
Interviewer5:17
Well, as this integration goes forward, of course both of your companies have announced layoffs in the recent months. As you integrate these two, would you expect there to be further headcount reductions?
C
Chuck Robbins5:28
I'll go first, and then Gary can add on. This deal was not predicated on cost synergies at all. It was built on revenue synergies and it was built on the integration and the new capabilities that we can bring to our customers. So that was never part of our plan as we were putting the integration plan together.
I
Interviewer5:47
And of course, you had mentioned, Chuck, that when it comes to AI, there's a concern and uptick in that being harnessed by bad actors. And Gary, I'm curious what you're seeing in your data when it comes to these AI cybersecurity attacks.
G
Gary Steele5:59
We're just seeing more sophisticated attacks, whether they're specifically targeted attacks, phishing attacks. It's a new set of tools that bad actors can use to drive more and more sophisticated attacks. And we feel very good about coming together and the work that we can do collectively driving great outcomes through the use of AI to ensure that our enterprise customers are well protected.
C
Chuck Robbins6:26
Yeah, if I could add real quickly, we have an organization called Talos that sees about 20 billion threats a day. So one of the things that we believe we can do is take all of that intelligence and inject it into the data platform that they provide customers and give them a whole new level of real-time visibility that they've never had before. So it's pretty exciting.
I
Interviewer6:45
And of course, in the press release this morning, this line caught my eye: over the next several months, customers can expect a number of new product innovations across the portfolio with the integration of Splunk. Could you give us some color on what those products might look like?
G
Gary Steele7:00
You know, we're early in our process, but we've identified some great opportunities where we can bring the technologies together to drive amazing outcomes for customers. So we will be announcing a set of things over the coming months, so stay tuned.
C
Chuck Robbins7:12
Stay tuned.
I
Interviewer7:14
I hope to talk to you guys about that when they are announced. But let's talk a little bit about the price tag and just how large this acquisition is: $28 billion. That is Cisco's largest acquisition ever. And when it comes to acquisitions of this scale, they tend to have a pretty low success rate if you look at some of the data. How do you minimize that risk?
C
Chuck Robbins7:35
Yeah, I think a couple things. Gary has been deeply involved in the whole integration planning. I think that if you go back and look even in your proxy, we talked about the fact that we had an early conversation in January, February of '22 before Gary came on board, and then the progress that he's made with this company and the detail planning that we did. We had our entire engineering leadership team involved in making the decision, and every single person felt like this was the right thing to do. And then when you look at the financials, I just think they were underappreciated because of what he was doing at the time. When you're picking up $4.4 billion and some change in revenue growing mid-teens at a 7x revenue multiple, and they're going to be cash flow accretive in year one, I think it's a pretty good deal.
G
Gary Steele8:27
Yeah, and I feel really good about the opportunity to come together. The cultures are really similar, the teams really enjoy working well together, and we found so much low-hanging fruit where we can go deliver great value to customers coming together. Usually it's about momentum that makes deals work, and I feel incredibly good about how we've come together thus far. There's a lot of ex-Cisco people at Splunk, so they know the culture, and we're going to work really hard to make sure that it's a place that they want to stay. We're working to retain that talent.
I
Interviewer8:57
Well, gentlemen, that sounds like a great place to leave it. Really enjoyed this conversation. Thank you so much. Of course, to Cisco CEO Chuck Robbins and former Splunk CEO Gary Steele.