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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Well, Cisco announced today

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Speaker 1: that it completed its twenty eight billion dollar acquisition of Splunk,

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Speaker 1: and its biggest deal ever. Now, these two software companies,

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Speaker 1: they're joining forces to power, protect, and advance the AI

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Speaker 1: revolution for their customers. And please to say that joining

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Speaker 1: me now we have Cisco CEO Chuck Robbins as well

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Speaker 1: as former Splunk CEO Gary steel Ian studio with me.

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Speaker 1: Great to see you both.

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Speaker 2: It's good to be here, here to be here.

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Speaker 1: So number one, congratulations. Number two, let's talk about the

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Speaker 1: timeline here because this deal, it was only announced in September,

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Speaker 1: and you think about the appetite for these deals coming

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Speaker 1: through and then getting blocked. How were you able to

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Speaker 1: secure approval so quickly?

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Speaker 2: It was primarily Gary's charm. I think, look hats off

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Speaker 2: to our legal teams, who I think did an amazing

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Speaker 2: job just providing clarity. I think it's also reflective of

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Speaker 2: the fact that we didn't have a lot of overlap

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Speaker 2: in the in the portfolios. I think two other things are.

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Speaker 2: Number One, I think there's a general understanding we actually helped.

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Speaker 2: We tried to help the regulars understand that from a

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Speaker 2: cyber perspective, which is super important. This is going to

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Speaker 2: be good for customers, and I think it also speaks

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Speaker 2: to the reputation that both companies have and with governments

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Speaker 2: around the world. Anything you'd add to.

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Speaker 3: That, No, I think that sums it up well.

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Speaker 1: Gary, since you were the charming one is according to Chuck,

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Speaker 1: I mean, do you think that the signals that maybe

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Speaker 1: scrutiny is lessening a little bit or was this really

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Speaker 1: about specific factors related to this deal.

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Speaker 3: I think it really was related to the specific factors

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Speaker 3: on this deal. I think, as Jeck described, there really

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Speaker 3: was no product overlap, and collectively we can do a

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Speaker 3: lot for customers from a cyber perspective, and so I

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Speaker 3: think there is a good agreement on that.

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Speaker 1: And I want to talk a little bit about your

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Speaker 1: timeline specifically, because you were named the Splunk CEO in

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Speaker 1: March twenty twenty two, you took over in April twenty

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Speaker 1: twenty two. How long into the job did you and

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Speaker 1: Chuck start talking of it?

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Speaker 3: So, Chuck and I first met at Davos in a

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Speaker 3: year ago, and that was our first time that we

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Speaker 3: had had the opportunity to meet. And I had prior

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Speaker 3: to that worked with the CFO Cisco, Scott Heron, and

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Speaker 3: so we had a prior relationship. He was on my

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Speaker 3: board at an earlier company. So there were some good things.

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Speaker 3: But it took a while, but the conversations went well.

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Speaker 3: We took it slow. We were very thoughtful about the

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Speaker 3: process and from my perspective on make sure I was

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Speaker 3: doing the right thing for our shareholders.

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Speaker 1: And we're going to get into integration and of course

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Speaker 1: product fit here. But I want to talk a little

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Speaker 1: bit more about Splunk because it had long been rumored

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Speaker 1: as a takeover target. You had the likes of Starboard,

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Speaker 1: Helman and Friedman taking stakes in the company. Did you

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Speaker 1: entertain any other bids in addition to, of course what

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Speaker 1: you got from Cisco.

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Speaker 3: So if you go back and look at our proxy

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Speaker 3: that we filed, Cisco was really the only party that

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Speaker 3: we were talking to at the time. But I would

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Speaker 3: say we had incredible support from our board members that

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Speaker 3: were private equity firms. About simmer Lake and Helman and

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Speaker 3: Freemen and Starbud was always a very subpartive relationship.

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Speaker 1: And let's talk a little bit more about this marriage.

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Speaker 1: Of course, Garrett, or rather Chuck, where do you see

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Speaker 1: splank really fitting in with the product and also the

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Speaker 1: financial strategy.

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Speaker 2: Yeah, I think there's two big areas that we have.

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Speaker 2: There's an emerging area called observability, which is effectively trying

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Speaker 2: to help our customers understand application performance, what's going on

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Speaker 2: in their technology infrastructure, particularly in this world where you

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Speaker 2: have hybrid cloud, multi cloud, private cloud SaaS and so

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Speaker 2: that's one big area. And then the other big area

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Speaker 2: of cybersecurity. If you think about the utilization of AI

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Speaker 2: by the bad actors, we're going to have to do

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Speaker 2: a better job of doing real time analytics and real

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Speaker 2: time detection and response. And in my view, we have

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Speaker 2: to be able to take three or four different things

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Speaker 2: that we're seeing happening at the same time, and those

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Speaker 2: three or four independently might not indicate a problem, but

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Speaker 2: together there's a problem. And their data platform. With our

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Speaker 2: detection response capabilities and all of our endpoints and all

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Speaker 2: of the sources of threat intelligence, so we have in

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Speaker 2: our massive amount of intel that we see on a

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Speaker 2: daily basis, we think brings our customers the ability to

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Speaker 2: actually do that in real time.

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Speaker 1: And of course when you talk to the cell side,

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Speaker 1: there's also this narrative out there that you're trying to

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Speaker 1: remake Cisco as a provider of networking services and really

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Speaker 1: trying to lessen your reliance on one time sales of equipment.

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Speaker 1: How do you see this deal as really pushing that

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Speaker 1: effort forward.

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Speaker 2: Well, that's an accurate narrative. So we have been moving

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Speaker 2: into more software. So I think the three metrics I

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Speaker 2: would share is at last quarter we hit a milestone

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Speaker 2: that we had set to try to get to fifty

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Speaker 2: percent of our revenue coming from recurring revenue, and we

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Speaker 2: did that last quarter, which is a big move from

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Speaker 2: eight years ago. The other thing is combined Gary and

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Speaker 2: the team bring four point two billion of ar ruin

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Speaker 2: in mid.

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Speaker 3: Teams, fifteen percent out of the CLIB at the end

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Speaker 3: of the year.

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Speaker 2: And combined we have arr now of almost twenty nine billion,

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Speaker 2: and we're over twenty billion from just software sales in

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Speaker 2: the company now, which is when we add Splunk software

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Speaker 2: sales to it. So I think we've made a lot

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Speaker 2: of progress and we're going to continue marching down that path.

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Speaker 1: Well as this integration goes forward. Of course, both of

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Speaker 1: your companies have announced layoffs in the recent months. As

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Speaker 1: you integrate these two, would you expect to be there

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Speaker 1: to be further headcount reductions.

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Speaker 2: I'll come at first, and then Gary can add on it.

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Speaker 2: This steal was not predicated on cost synergies at all.

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Speaker 2: It was built on revenue synergy. So it was built

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Speaker 2: on the integration that we talked about and the new

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Speaker 2: capabilities that we can bring to our customers. So that

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Speaker 2: was never part of our plan as we were putting

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Speaker 2: the integration plan together.

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Speaker 1: And of course you had mentioned, Chuck that when it

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Speaker 1: comes to AI, there's a concern and uptick and that

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Speaker 1: being harnessed by bad actors. And Gary, I'm curious what

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Speaker 1: you're seeing in your data when it comes to these

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Speaker 1: aiyer security attacks.

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Speaker 3: You've just seen more sophisticated attacks, whether they're specifically targeted attacks,

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Speaker 3: phishing attacks. We're just seeing more sophistication and a new

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Speaker 3: set of tools that bad actors can drive more and

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Speaker 3: more sophisticated attacks. And we feel very good about coming

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Speaker 3: together and the work that we can do collectively driving

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Speaker 3: great outcomes through the use of AI to ensure that

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Speaker 3: our enterprise customers are well protected.

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Speaker 2: If I could add real quickly, we have an organization

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Speaker 2: called Tellos that sees about twenty billion threats a day,

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Speaker 2: and so one of the things that we believe we

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Speaker 2: can do is take that all of that intelligence and

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Speaker 2: inject it into the data platform that they provide customers

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Speaker 2: and give them a whole new level of real time

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Speaker 2: visibility that they've never had before. So it's pretty exciting,

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Speaker 2: and of.

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Speaker 1: Course, in the press release this morning, this line caught

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Speaker 1: my eye that over the next several months, customers can

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Speaker 1: expect a number of new product innovations across the portfolio

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Speaker 1: with the integration of splun Could you give us some

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Speaker 1: color on what those product look like.

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Speaker 3: You know, we're early in our process, but we've identified

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Speaker 3: some great opportunities where we can bring the technologies together

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Speaker 3: to drive amazing outcomes for customers. So we will be

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Speaker 3: announcing a set of things over the coming months, So

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Speaker 3: stay tuned, Stay tuned.

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Speaker 1: I hope to talk to you guys about that when

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Speaker 1: they are announced. But let's talk a little bit about

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Speaker 1: the price tag and just how large this acquisition is

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Speaker 1: twenty eight billion dollars out of Cisco's largest acquisition ever.

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Speaker 1: And when it comes to acquisitions of these scales, they

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Speaker 1: tend to have a pretty low success rate. If you

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Speaker 1: look at some of the data how to minimize that risk.

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Speaker 2: Yeah, I think a couple things. Gary has been deeply

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Speaker 2: involved in the whole integration planning. I think that if

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Speaker 2: you go back and look even in your proxy, we

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Speaker 2: talked about the fact that we had an early conversation

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Speaker 2: in January February of twenty two before Gary came on board,

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Speaker 2: and then the progress that he's made with this company

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Speaker 2: and the detail planning that we did. We had our

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Speaker 2: entire engineering leadership team involved in making the decision, and

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Speaker 2: every single person felt like this was the right thing

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Speaker 2: to do. And then when you look at the financials,

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Speaker 2: I just think they were underappreciated because of what he

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Speaker 2: was doing at the time. And when you're picking up

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Speaker 2: four point four and some change billion in revenue, growing

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Speaker 2: mid teams and at seven x revenue multiple and they're

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Speaker 2: we're going to be cash flow accreative in year one,

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Speaker 2: it's I think it's a pretty good deal.

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Speaker 3: Yeah, And I feel really good about the opportunity to

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Speaker 3: come together. The cultures are really similar, the teams really

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Speaker 3: enjoy working well together, and we found so much low

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Speaker 3: hanging for it where we can go deliver great value

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Speaker 3: to customers coming together and usually it's about momentum that

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Speaker 3: makes deals work, and I feel incredibly good about how

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Speaker 3: we've come together thus far.

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Speaker 2: And there's a lot of ex Cisco people had Splunk,

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Speaker 2: so they know the culture and we're going to work

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Speaker 2: really hard to make sure that it's a place that

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Speaker 2: they want to stay, and we're working to retain that talent.

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Speaker 1: Well, gentlemen, that sounds like a great place, saliv I

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Speaker 1: really enjoyed this conversation. Thank you so much, of course.

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Speaker 1: Tacisco CEO Chuck Robbins and former Spunk CEO Gary Steel