In order to give its customers more insight into their application layers and drive the digital transformation for IT and business, Cisco announced its intent to acquire AppDynamics for US$3.7 billion.
AppDynamics, an application intelligence company, was supposed to be the first tech company to go public this year, according to a Wall Street Journal report. Early Tuesday, “bankers increased the IPO’s estimated price that would have valued AppDynamics at as high as about US$2 billion,” said the report.
One of the reasons for Cisco picking up AppDynamics is so the company can be well equipped to help its customers tackle some of the challenges IT departments are faced with today, according to vice president of corporate business development Rob Salvagno in a Cisco blog post.
(Related: Enterprises need that digital transformation)
“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,” he wrote. “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.”
Another report from Reuters said that Cisco’s offer comes out to roughly $26 per share, which is higher than the estimated $12 to $14 share range it planned for. Although the price appears to be high, according to RBC analyst Mitch Steves in the Reuters report, it comes out to “more software revenue as positive for Cisco.”
This acquisition is Cisco’s largest (besides its acquisition of Sourcefire, the company that built security platforms for corporate and government customers, which sold for $2.7 billion, according to Bloomberg).
The acquisition also supports Cisco’s transition toward “software-centric solutions,” wrote Salvagno. The acquisition is expected to close in Cisco’s third quarter of fiscal year 2017, and AppDynamics will continue to be led by CEO David Wadhwani as a new software business unit under Rowan Trollope, Cisco’s senior vice president and general manager of IoT and applications business.