Cisco Nabs AppDynamics for $3.7B

Pulls trigger on deal as AppDynamics flirted with an IPO
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In a move that amplifies its software-driven focus, Cisco Systems has inked a deal to acquire AppDynamics for $3.7 billion and nab it just as AppDynamics was getting ready to pull the trigger on an IPO.

The deal, announced Tuesday, is consistent with Cisco’s stated strategy and our vision of the company’s evolution towards a more software centric business,” Raymond James analyst Simon Leopold said in a research note.

He said the price tag for AppDynamics isn’t “large relative to Cisco,” but considers the deal “expensive” (the mid-point of AppDynamics’s IPO range would have created a market cap of about $1.6 billion), despite the benefits it gives Cisco as its evolution of hybrid public-private cloud strategies become increasingly complex.

“The transaction may reduce the possibility of Cisco making other similarly substantial acquisitions for some time but may catalyze Cisco’s competitors (e.g., HP Enterprise, Dell, etc.) seeking similar targets,” Leopold said.

"Applications have become the lifeblood of a company's success. Keeping those apps running and performing well has never been more important. Unfortunately, that job has only gotten harder, as IT departments and developers struggle with a tangled web of disconnected, complex data that's hard to understand," said Rowan Trollope, Cisco senior vice president and general manager of Cisco's Internet of Things and Applications Business Group, said in a statement. "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, and help IT to drive a new level of business results."

Cisco said AppDynamics will continue to be led by CEO David Wadhwani as a new software business unit of Cisco’s IoT and applications business, reporting to Trollope. Cisco expects to wrap the deal in its fiscal Q3. 

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