Technology

Cisco to Acquire AppDynamics for $3.7 Billion

The deal "supports Cisco’s strategic transition toward software-centric solutions that deliver predictable recurring revenue," the company says.
Matthew HellerJanuary 25, 2017
Cisco to Acquire AppDynamics for $3.7 Billion

Cisco Systems has agreed to acquire performance software company AppDynamics for $3.7 billion as it continues to diversify away from its core networking business.

AppDynamics’ software manages and analyzes applications for about 2,000 paying customers, including NASDAQ, Nike and Cisco. The merger announcement came the day before AppDynamics was planning to price its long-awaited initial public offering.

According to Forbes, the high end of the IPO range would have valued the company at $1.72 billion — less than half what Cisco is paying and well below AppDynamics’s $1.9 billion value when it last raised capital in November 2015.

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The deal is Cisco’s largest acquisition since it bought security company Sourcefire for $2.7 billion in 2013.

“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,” Rob Salvagno, Cisco’s vice president of corporate development, said in a blog post. “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,” he added.

As Reuters reports, Cisco, like other legacy technology players, has been trying to stay ahead of technology developments, such as the rise of cloud computing, that could otherwise threaten their core businesses. Last week, Hewlett Packard Enterprise said it would buy cloud startup SimpliVity for $650 million in cash.

TechCrunch noted that the acquisition of AppDynamics gives Cisco “a tool for monitoring the performance of applications, regardless [of] the application delivery platform. The idea is to find issues and deal with them before they become a big problem for end users.”

AppDynamics also gathers data about the apps, the connections to other systems, and the devices being used to connect to the app. “All of this data is a natural byproduct of the monitoring process — and could have great value when combined with other network information,” TechCrunch said.