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Cisco To Acquire AppDynamics For $3.7 Billion: Software Maker Snapped Up Right Before IPO

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Cisco, the biggest manufacturer of network hardware, has agreed to buy AppDynamics for the sum of $3.7 billion.

With the agreement in place, Cisco will be purchasing AppDynamics right before the software maker launches its IPO this week.

Cisco's Acquisition Of AppDynamics

Cisco will be adding the software and services offered by AppDynamics to its portfolio to help its corporate customers in monitoring and fine tuning the performance of their respective business systems. Through a more detailed overview, companies are able to better determine performance issues and possible causes which may be affecting the rest of their processes.

The idea behind the offerings of AppDynamics is to catch the problems before they become major ones. Through the acquisition, Cisco will be getting another touchpoint with clients and adding upon its growing list of software and services.

"The combination of Cisco and AppDynamics will allow us to provide end to end visibility and intelligence from the network through to the application; which, combined with security and scale, will help IT to drive a new level of business results," said Cisco senior VP and Internet of Things and Applications Business Group general manager Rowan Trollope in a press release.

AppDynamics President and CEO David Wadhwani stated the company's excitement in joining Cisco, as that will allow AppDynamics to help more companies worldwide in building and running the applications required to succeed in the digital landscape of today. Wadhwani will still lead AppDynamics, but the company will become a new unit under the Internet of Things and Applications division of Cisco.

Cisco Transformation Continues

The acquisition continues the work of Cisco CEO Chuck Robbins, who has been snapping up software and services companies to boost the revenue growth of Cisco. Such a shift in direction is needed as the computing industry continues to move away from the fixed hardware and software solutions offered by Cisco and into cheaper options such as cloud-based systems.

Cisco has expanded its focus to include business lines such as security, collaboration, and Internet of Things, with Robbins, since becoming CEO in 2015, looking to transform the company by offering clients with customizable and more flexible products, which would be able to generate recurring revenues over time.

In February of last year, Cisco acquired Jasper Technologies, the developer of a cloud-based Internet of Things service platform, for $1.4 billion in cash.

AppDynamics IPO Called Off

The original plan was for AppDynamics to launch its IPO in December, but decided to delay the move due to the presidential elections in the United States.

AppDynamics was expected to price on the evening of Jan. 25 as the first technology company that would be going public this year. Bankers earlier increased the estimated price of the company's IPO that would value AppDynamics as much as around $2 billion.

However, the IPO has now once again been called off due to the acquisition by Cisco. It is possible that AppDynamics was testing the IPO market to gauge the company's value, which would help in negotiations with a larger company for a possible acquisition.

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