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Cisco to Buy AppDynamics for $3.7 billion

January 25, 2017

AppDynamics has been busy lately readying its public offering. In fact, it was supposed to price the IPO tomorrow. But Cisco had other plans.

Today the networking giant moved to buy the application performance monitoring startup for $3.7 billion.

That’s about double the valuation of AppDynamics. And it is Cisco’s largest acquisition since 2013, when it spent $2.7 billion on Sourcefire.

Cisco is buying AppDynamics to help it provide end-to-end visibility and intelligence from the network through to the application.

"Applications have become the lifeblood of a company's success. Keeping those apps running and performing well has never been more important,” said Rowan Trollope, senior vice president and general manager of Cisco's Internet of Things and Applications Business Group, in announcing the deal today. “Unfortunately, that job has only gotten harder, as IT departments and developers struggle with a tangled web of disconnected, complex data that's hard to understand.”

                   Image via Bigstock

San Francisco-based AppDynamics has about 2,000 customers. That includes Directv, ExactTarget, NASDAQ, Progressive, TESCO, and UBS.

One of three leaders in the Gartner Magic Quadrant for Application Performance Monitoring, AppDynamics heads up the market along with Dynatrace and New Relic. Meanwhile, BMC, CA Technologies, HPE, IBM, and Riverbed (which announced plans to buy APM company Aternity in July of last year) are in the challengers quadrant. Correlsense, Microsoft, and Oracle are considered niche players. And Nastel Technologies, Gartner says, is the APM market’s sole visionary.

“AppDynamics has enjoyed one of the highest, if not the highest, revenue growth rates in the market,” writes Gartner. “The technology is consistently identified by its customers as being among the easiest to use and enjoys a relatively rapid time to value.”

Gartner also noted that AppDynamics in September of 2015 saw a change of top leadership in an effort to help the company drive growth and profitability. That happened when former Adobe guy David Wadhwani took over as CEO for co-founder Jyoti Bansal.

Following Cisco’s acquisition of AppDynamics, Wadhwani will continue to lead the effort, which will become a business unit within Cisco's IoT and Applications business. He will report Trollope.

The deal is scheduled to close in the third quarter of fiscal year 2017.

Edited by Maurice Nagle

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