Cisco Acquires AppDynamics: What It Means For CSCO

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Cisco ()

Cisco (CSCO) made its first merger and acquisition for 2017, with its intent to acquire AppDynamics, a leading privately held application intelligence software platform. Cisco rushed to acquire AppDynamics just before the tech unicorn’s IPO. At $3.7 billion, Cisco has picked AppDynamics for twice its valuation price at $1.9 billion (at the time of its fundraising), making this its largest acquisition in recent times.

Acquisitions are integral to the growth strategy for companies to drive more recurring revenue streams by enabling new market access, bringing in mature products and solutions, business models, as well as technology and talent.

The acquisition comes as a part of Cisco’s broader commitment “to capitalize on market transitions as sources of future opportunities as part of the continued transformation of its business.” Cisco believes that the market transition is happening at a great speed in the IT space and thus has been working to enhance its capabilities in the fast-emerging areas of security, collaboration, services, the Internet of Things (IoT), cloud computing, software, and silicon.

Cisco, an active player in the acquisition market, has acquired 44 companies in the past five-years.

Why AppDynamics?

Software apps, application software, or simply apps, have become increasingly important for a company's success. Almost all businesses are faced with immense pressure to accelerate innovation while ensuring that those apps run and perform perfectly. Customers expect easy-to-use apps, but complexities at the company’s end are on the rise and all this requires a huge amount of IT back-end support.

To ensure competitiveness with the increasingly demanding customers and stiffer competition, organizations cannot deploy legacy IT operations management products to monitor and manage their software applications and underlying IT infrastructures. Thus, Application Performance Monitoring (APM) companies have emerged as a preferred choice for enterprises to do the task.

Gartner defines APM “as one or more software and hardware components that facilitate monitoring to meet five main functional dimensions: end-user experience monitoring, runtime application architecture discovery modeling and display, user-defined transaction profiling, component deep-dive monitoring in application context, and analytics.”

AppDynamics is among the major vendors of the global APM market and offers an innovative, enterprise-grade app intelligence software platform. AppDynamics has approximately 2,000 customers all over the world, including leading companies such:

  • Nasdaq
  • Expedia
  • Nike
  • Reserve Bank of New Zealand
  • UBS
  • ExactTarget
  • Progressive

The company has grown rapidly, reflected by the rise in its revenue which was reported at $23.6 million, $81.9 million and $150.6 million during FY14, FY15 and FY16 (ended January of each year) respectively.

With Cisco and AppDynamics coming together, enterprises can expect actionable insight not just into apps but across their technological stack that can be applied to improve business performance and customer experiences while generating revenue opportunities.

David Wadhwani, CEO of AppDynamics, will continue to lead the company as a new software business unit under Rowan Trollope, Cisco's senior vice president and general manager of its IoT and Applications business. The acquisition is expected to close in Cisco’s third quarter of fiscal year 2017.

With the complementary business AppDynamics brings to Cisco, the acquisition should result in a smooth integration and a boost to the revenue stream. Cisco’s shares are up 36.79% over the past one-year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Prableen Bajpai

Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.

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