Cisco Systems on Thursday agreed to buy cybersecurity firm Splunk for about $28 billion in its biggest-ever deal to strengthen its software business and capitalise on the boom in artificial intelligence. 

The deal, which is the biggest technology transaction of the year, will help reduce Cisco’s reliance on its massive networking equipment business, which has suffered in recent years from supply chain issues and a post-pandemic slowdown in demand. 

“The thing that gives you conviction is we are bringing together two companies around security and observability, which are two of the most important areas for our customers and areas where they are unlikely to cut spending in just because of the criticality of these threats,” Cisco CEO Chuck Robbins told the Reuters in an interview. 

Under Mr Robbins, Cisco has over the years attempted to reduce its traditional reliance on hardware and doubled down on its bets in software and services through deals. 

Splunk is known for its strengths in the area of data observability, which helps companies monitor their systems for cybersecurity risks and other threats. The company operates a subscription-based pricing model for customers. 

The two companies have held merger talks in the past, but those discussions fell apart, the Reuters had previously reported. 

Cisco offered $157 in cash for each share of Splunk, representing a 31 per cent premium to the company’s last closing price. 

San Jose, California-based Cisco already has a data-security partnership with Splunk, whose more than 15,000 customers include many prominent companies such as Coca-Cola, Intel and Porsche.