Cisco-Splunk tie-up would have significant synergies, Jefferies says
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Cisco (NASDAQ:CSCO) potentially buying Splunk (NASDAQ:SPLK) would have strategic value for the Chuck Robbins-led Cisco, but a significant amount of synergies too, Jefferies said in a research report.
In a note to investors, analyst Brent Thill, who has a buy rating and $160 price target on Splunk, said that Splunk's story has had "many twists and turns over the past several quarters," noting it has struggled with sales execution, lack of visibility and an elongated cloud business model transition. 
However, Splunk's shares have fallen nearly 50% from their peak in September 2020 and shares now trade at six times 2023 revenues. 
Splunk shares were up nearly 7% to $122.23, while Cisco was down nearly 1% to $53.50 in premarket trading on Monday.
Nonetheless, Thill noted that Splunk has more than $2.5 billion in revenue, with security accounting for half of it. Given that Splunk has a "sizable" presence in the space, it could be a "significant opportunity" for Cisco, which has lagged others in the space.
In addition, Splunk has a significant observability business, that Thill said "would be a natural complement to Cisco's existing monitoring solutions (AppDynamics/ThousandEyes) and could better position Cisco as an end-to-end platform to compete with rising stars such as CrowdStrike, Datadog and others." 
Thill also said that a deal between the two companies would remove the concern for a new Splunk CEO, which has come into play given Splunk's issues with its transition to a cloud business model and "general loss in mindshare."
Earlier on Monday, Credit Suisse said that Splunk is a "unique asset," highlighting the potential for a Cisco deal.