5 Software Firms Ripe for M&A Plays After $28B Splunk Deal
Cisco’s planned purchase of observability software firm Splunk could be a harbinger of more Big Tech software plays, observers say.
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New York-based Datadog is a software solutions company that offers a cloud-based monitoring and analytics platform to automate infrastructure monitoring, application performance monitoring, and log management for real-time observability of customers.
The company reported second-quarter revenue growth of 25% year-over-year to $509 million. The company has announced new innovations for generative AI, observability, security, developer experience, and cost management. “We continued to execute well in the second quarter … with continued customer growth, and increased multi-product adoption by our customers,” Olivier Pomel, Datadog co-founder and CEO, said in a press release.
Based on its most recent stock price of $86.57, Datadog would be valued at around $28 billion.
Cloud security firm CrowdStrike Holdings offers an advanced cloud-native platform to secure endpoints and cloud workloads, identity and data for business customers.
CrowdStrike has been making bold moves in the software space. The company on Wednesday announced the launch of an equity free startup accelerator with Amazon Web Services (AWS). And on Sept. 19, the company announced its play to acquire Bionic for $350 million to bolster its Falcon Cloud Security product.
With its most recent share price of $163.62, CrowdStrike’s market capitalization would be about $38.6 billion. Any suitor would likely be paying a hefty price to acquire CrowdStrike, considering its most recent quarterly report showed revenue of $731.6 million for the second quarter of fiscal 2024, a 37% increase compared to the same period in fiscal 2023.
“The AI-powered Falcon platform’s native capabilities across our cloud, identity and next-gen SIEM businesses are unique in the market,” George Kurtz, CrowdStrike president, CEO and co-founder, said in a statement.
Waltham, Mass.-based observability and security software firm Dynatrace offers platforms designed to help organizations secure hybrid and cloud environments.
The company’s most recent earnings for the first quarter of fiscal 2024 ended June 30 show strong revenue of $333 million, up 25%. Potential buyers might be attracted by the subscription revenue of $316 million.
“Observability and application security are becoming critical to the success of organizations around the world,” Rick McConnell, Dynatrace’s CEO, said in a statement. “We believe hypermodal AI and developer observability will be catalysts for incremental future growth as they are expected to extend our reach to a wider range of users.”
Dynatrace’s most recent stock price was $45.94, giving it a market capitalization of roughly $13 billion.
American-Dutch company Elastic NV is a search company offering software as a service (SaaS) focused on search, logging, security, observability, and analytics use cases.
Elasticsearch technology is used by eBay Wikipedia, Yelp, Uber, Lyft, Tinder, and Netflix. The company’s meetup community totals more than 100,000 members.
The company’s most recent financial report shows revenue of $294 million for the most recent quarter ending July 31, up 17% year-over-year.
Ash Kulkarni, Elastic’s CEO, said in a statement, “We had a strong start to the fiscal year, and delivered better than expected results as customers continued to consolidate vendors and adopt Elastic as their AI-powered data analytics platform of choice of addressing multiple real-time search use cases.”
Elastic’s most recent stock price of $80.57 gives the company a market cap of about $8 billion.
New York-based Grafana Labs develops open-source software to visualize operational data, enabling users to control unified monitoring. The company was founded in 2014.
The company is privately held and has 20 million users after 10 years in business.
“Observability data, in its early days, the domain of the site reliability and platform engineering teams -- has exploded in popularity with developers at large,” Tom Wilkie, Grafana’s CTO, said in a statement.
Grafana in April raised $240 million in its series D investment round, bringing its total investment haul to $535.2 million. Grafana has not posted its most recent valuation, but after its Series C funding round, the company said its value was $3 billion.
New York-based Grafana Labs develops open-source software to visualize operational data, enabling users to control unified monitoring. The company was founded in 2014.
The company is privately held and has 20 million users after 10 years in business.
“Observability data, in its early days, the domain of the site reliability and platform engineering teams -- has exploded in popularity with developers at large,” Tom Wilkie, Grafana’s CTO, said in a statement.
Grafana in April raised $240 million in its series D investment round, bringing its total investment haul to $535.2 million. Grafana has not posted its most recent valuation, but after its Series C funding round, the company said its value was $3 billion.
Networking giant Cisco’s massive $28 billion bid to buy software firm Splunk could spark a mergers and acquisitions feeding frenzy for other Big Tech players, analysts and investors say.
With tech companies still licking their wounds after a tough post-pandemic period saw profits and revenues nosedive, adding software companies with growth potential may seem like a safe bet. Add to that the fact that some software companies may be undervalued as stock prices have dropped, and there are plenty of bargains to be had in a promising software market, analysts say.
Wedbush analyst Dan Ives called Cisco’s Splunk purchase a “well-designed strategic poker move that caught the Street off guard to get a great unique software asset at a fair multiple.” Cisco’s bid of $157 per share is roughly six times Splunk’s projected 12-month revenue, according to financial filings.
Ives thinks Cisco’s “shot across the bow” will prompt other tech giants like Microsoft, Google, Oracle, Amazon, Adobe, and IBM to consider their own deals to eat up software and cybersecurity companies.
InformationWeek takes a look at five software firms that could be attractive for the next Big Tech play:
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