Cisco Acquires AppDynamics for $3.7 Billion
AppDynamics, a privately held company, provides solutions that help in monitoring and managing application performance. Jyoti Bansal is the Founder & Chairman, David Wadhwani, the CEO and Bhaskar Sunkara, the CTO.
The shares of AppDynamics were to be listed on NASDAQ on January 26, 2017 and this IPO was to be the first big-tech IPO of this year. The shares were to be offered in the price range of $12 to $14 valuing the company at $1.7 billion. But, two days before the expected listing on NASDAQ, in a surprise announcement, tech giant Cisco took over AppDynamics for $3.7 billion!
Cisco is a technology and networking company. This acquisition marks its entry into software, in a big way. Cisco, a customer of AppDynamics, paid more than twice the market value to acquire AppDynamics because the application performance software was very strategic for Cisco’s future growth and business. With this acquisition, Cisco gets a tool which can monitor application performance, irrespective of the application delivery platform. This will give Cisco a competitive advantage in the future of in-network applications. AppDynamics was also a dominant player in its category apart from managing to increase its revenues by 5X to 14X, from its existing customers, in 2016. All this added to the premium paid by Cisco.
“Digitization and the transition to cloud are forcing the worlds of IT and business to blend together. In the digital economy, applications are critical. Combining real-time visibility and intelligence at the network, security and application layers is transformational for companies. It can provide them with insight into the state of their business and, most importantly, into the quality of their customers’ experiences,” says Rob Salvagno, Head of M&A and Venture Investment team, Cisco. “To drive this transformation, we are excited to announce Cisco’s intent to acquire AppDynamics, Inc., a leading privately held application intelligence software platform!”
With the growing importance of artificial intelligence (AI) and machine learning, quality data has acquired growing importance. Cisco will be able to leverage this acquisition to penetrate an already growing lucrative market. “As companies across industries are expanding their digital infrastructure, IT departments are faced with vast amounts of complex, siloed data. 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,” adds Salvagno.
Ray Wang, Founder & Principal Analyst, Constellation Research, said in Techcrunch that, “The long term play is when you add this type of software onto the network, you gain network intelligence and more importantly a critical piece for IoT, as well as building a long-term neural network and machine learning story.” When Cisco acquired Jasper Technologies, they got a platform to manage IoT connectivity. The acquisition of AppDynamics provides Cisco with a tool to monitor IoT based applications. With these two acquisitions, Wang believes that Cisco will have a head start to cater to automated approaches in the future which would be driven by data.
This high profile acquisition lays the path for more similar acquisitions of unicorns during 2017, provided they are strategic or fast-growing enough to pique the interests of potential acquirers. In 2016, such acquisitions accounted for over $63 billion.
The acquisition of AppDynamics would be closed by the third quarter of 2017. The AppDynamics team will be a new software business unit led by the AppDynamics CEO, David Wadhwani, who will report to Rowan Trollope, Senior Vice President & General Manager (IoT & Applications Business), Cisco.
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