Cisco swoops to purchase AppDynamics for $3.7 billion days before IPO

Cisco swoops to purchase AppDynamics for $3.7 billion days before IPO

Cisco swoops to purchase AppDynamics for $3.7 billion days before IPO
Cisco swoops to purchase AppDynamics for $3.7 billion days before IPO

Technology giant Cisco has succeeded in a last-minute bid to purchase AppDynamics, agreeing a deal hours before the latter was expected to launch an IPO. 

Cisco and AppDynamics have agreed a price of $3.7 billion, that will see the application intelligence services provided by AppDynamics bolster its ability to offer clients end to end insight across their intelligence stack. The deal was announced the day before AppDynamics was due to launch an initial public offering (IPO).

The agreed sale price is almost double the $1.72 billion market value that AppDynamics was seeking in its IPO. Cisco’s SVP and chief strategy officer, Hilton Romanski, pointed out that his company is speculating, and paying a higher price for AppDynamics’ industry-leading growth rate.

AppDynamics acquisition part of Cisco’s transition to software-centric solutions

In a blog post, Cisco’s head of corporate development, Rob Salvagno, went into more detail about how AppDynamics’ services will fit in with those that Cisco already offers:

“As companies across industries are expanding their digital infrastructure, IT departments are faced with vast amounts of complex, siloed data. AppDynamics helps many of the world’s largest enterprises translate this data into business insights and empowers them to drive value for their customers in today’s digital world.

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He also wrote that, “together with Cisco’s industry leading digital network architecture, customers will now have unprecedented end to end insight across their technology stack, from infrastructure to application. With this insight, companies will be equipped to improve customer experiences and accelerate revenue opportunities. The acquisition of AppDynamics also supports Cisco’s strategic transition toward software-centric solutions that deliver predictable recurring revenue.”

Value of data services becoming more apparent

Michael Segal, area vice president of strategic marketing, at NETSCOUT argues that Cisco’s purchase of AppDynamics highlights the value of data:

“Cisco is in the application and service business,” he said. “It spent $1.4 billion on acquiring Jasper Wireless last year and is about to invest another $3.7bn in AppDynamics. Cisco’s acquisition strategy is indicative of changes sweeping the enterprise as more and more companies become reliant on applications, services, and data, and is a shift that’s fuelling a rapid period of digital transformation.”

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Segal continued, “The value of digital services is becoming more apparent as we move towards an information-driven economy where data has become the new currency. Almost every aspect of business operations is now software-based with business success becoming intrinsically linked to the performance of applications, cloud computing, data centres, and other digital assets.”

“Enterprise networking has changed dramatically as a result, becoming more dynamic through technologies such as software-defined networking. These changes have left CIOs and IT departments wondering how to deal with this complex new environment. They’re faced with scenarios they never envisaged five years ago, ten years ago, or even last month, as they play catch-up with the rapid pace of technology.”

Current AppDynamics CEO David Wadhwani will continue in his position as the company forms a new software business unit as part of Cisco’s IoT and Applications business. The deal is expected to be finalized in the third quarter of 2017.