Cisco Systems is acquiring AppDynamics for a whopping $3.7 billion, almost double the estimated price in its IPO filing that valued the company at $1.72 billion. While AppDynamics is ready to forgo IPO route to profit its promoters, Cisco is keen to add software face under its new market strategy.
With the acquisition, Cisco wants end its image as maker of networking gear, and add the app-based software and services that help companies to monitor and fine-tune the performance of their own business systems. The deal for San Francisco-based AppDynamics took place just a day before the IPO was set to hit the markets.
Cisco CEO Chuck Robbins is keen to shift the company from expensive fixed hardware to software and services side with more flexible, customizable products that will generate recurring revenue in a longer period. AppDynamics will become part of Cisco’s IoT and Applications business, reporting to Rowan Trollope.
AppDynamics had reported $158.4 million in revenue in the nine months ended 31 October, almost 50% more YoY and Cisco’s security business was its customer. Cisco, with $71 billion in reserves as total cash, cash equivalents and investments, is adding more variety of IT firms to its basket.