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Cisco buys Tech IPO Candidate AppDynamics for USD 3.7 billion

Cisco just snapped up AppDynamics for USD 3.7 billion, one day before the software developer was scheduled to sell shares to the public at a valuation of less than USD 2 billion. Cisco, the world’s biggest maker of networking gear, will add AppDynamics’ software and services that help companies to monitor and fine-tune the performance of their own systems.
AppDynamics, based in San Francisco, will become part of Cisco’s Internet of Things and Applications Unit, reporting to Rowan Trollope. Cisco’s last large deal, a USD 1.4 billion acquisition of Jasper last year, is also part of that unit. Chief executive officer Chuck Robbins has been buying software and services companies, working to push up Cisco’s revenue growth, which has stalled as the computing industry shifts away from expensive fixed hardware and software.
Robbins is tasked with pushing Cisco into a new era of computing. The big switches and routers that made Cisco a dominant force in computer networking through the last decade are no longer in high demand now, as businesses move to buying commodity boxes controlled by a rather convenient customizable software. For Cisco to stay relevant in a world of cloud-computing and big data, the company needs to own more of the software that corporations are buying.
The acquisition will be paid with cash and assumed equity awards, San Jose, California-based Cisco said in a statement. The deal is expected to close in Cisco’s fiscal third quarter, which ends in April.
Cisco is one of the richest companies in technology, with USD 71 billion in total cash, cash equivalents and investments at the end of its most recent quarter. About USD 10.4 billion of that is located in the U.S.
For a firm like AppDynamics, a buyout gives existing investors a defined return. If the company had gone public, investors would be left selling down the stake over time.