AT&T and Cisco both bought a new identity. One already gave it back.
AT&T paid $108.7 billion for Time Warner and received $40.4 billion in cash and debt retention on exit. Cisco paid roughly $28 billion for Splunk; excluding Splunk, its revenue declined 1% in Q2 FY2025.
Transcript
Two big companies tried to buy their way into a new kind of business. One bought a Hollywood studio. The other bought a software company.
In October 2016, AT&T agreed to buy Time Warner for $108.7 billion, counting the debt. The pitch: own the pipes and the content that flows through them. In March 2024, Cisco completed its purchase of Splunk for roughly $28 billion in cash, the biggest deal Cisco has ever done.
The AT&T version of the bet did not last. In February 2022, AT&T slashed its dividend from $2.08 to $1.11 a share. On April 8, 2022, AT&T handed WarnerMedia to its shareholders as part of the new Warner Bros. Discovery.
At closing, AT&T received $40.4 billion in cash and WarnerMedia's retention of certain debt, for a Time Warner it had agreed to buy for $108.7 billion.
Cisco's bet is younger. In fiscal 2024, Cisco's annual recurring revenue hit $29.6 billion, up 22%, including $4.3 billion from Splunk. But Splunk cut Cisco's non-GAAP earnings per share by $0.04 that year.
And excluding Splunk, Cisco's revenue declined 1% in the second quarter of fiscal 2025. Cisco's networking revenue had fallen 23% the quarter before.
Buying a business gives you its revenue. It does not make you that kind of company. AT&T found that out and gave Time Warner away. Cisco's story is still being written, and one failed deal does not doom another. But before you buy an identity, ask what your old business does while you digest it.
The records behind this video
Every figure in the video comes from these Decision Records, each with its sources.
Run this decision
The Cannibalization Strategy Pack. “Should you launch the thing that takes revenue from your best business?” The framework, a model, a deck and the sourced cases, for running the same call on your own business. See the pack, $499 → Or start with the free guide to this decision →
