Splunk cuts 500 employees ahead of Cisco acquisitionSplunk cuts 500 employees ahead of Cisco acquisition
Splunk's newest round of layoffs will impact 7% of its workforce, but CEO Gary Steele said the reduction is not a result of Cisco's planned acquisition of the company.
November 2, 2023
Ahead of a planned acquisition by Cisco, Splunk is dropping 7% of its global headcount by April 30, 2024, at a cost of $42 million.
Splunk, a data mining and cybersecurity company, started the year with 8,000 employees but cut 325 jobs in February. This latest round of layoffs will likely impact an additional 500 workers, according to SFGate.
Cisco announced plans to acquire Splunk in September for $28 billion. The networking giant's CEO Chuck Robbins said the move would boost Cisco's AI business, bringing together two companies focused on improving protection of enterprise data through security and observability measures.
At the acquisition announcement, Pinjalim Bora, CFA with J.P. Morgan, was optimistic about the team-up, stating that "Splunk's accomplishments have been remarkable" as a leader in machine log analytics.
As part of its most recent workforce reduction, Splunk predicts it will incur nearly $42 million in charges, including about $37 million in future cash expenditures related to "severance payments, certain retention payments, employee benefits and employee transition costs." Splunk also forecasts about $5 million of the $42 million to go toward non-cash charges for stock-based compensation.
Not because of Cisco
In a message to employees, Splunk CEO Gary Steele said the workforce reduction aligns with the company's goal to better meet the needs of Splunk's customers and partners while remaining "sustainable and cost effective."
Steele added that the decision to reduce headcount is "not a result of our agreement with Cisco," but rather a continuation of initiatives "we've undertaken across Splunk for more than a year to align our resources and operating structure to deliver ongoing and incremental value for our customers."
After the announcement, "Splunk (SPLK) shares closed at $147.16 on Tuesday, slightly more than 6% below Cisco's (CSCO) offer price of $157 per share," reported Seeking Alpha.
While Splunk's CEO said the company has done well in fiscal year 2023, the economy has had an impact on growth. "The overall market has retracted and we expect the macro environment will continue to be unpredictable for the foreseeable future," he said.
Moving forward, Steele said it would be important for Splunk to "continue to evolve our organizational design" to support the company's workforce and operate in an efficient and sustainable manner. After the acquisition, Steele will join Cisco's leadership team and report to Cisco CEO Chuck Robbins.
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