To shore up its software offerings, Cisco has agreed to acquire AppDynamics for roughly $3.7 billion in cash and assumed equity awards.
The announcement comes just days before the San Francisco-based application intelligence software startup was expected to go public.
“Applications have become the lifeblood of a company’s success,” Rowan Trollope, SVP and general manager of Cisco’s Internet of Things and Applications Business Group, stated. “Keeping those apps running and performing well has never been more important.”
Reporting to Trollope, AppDynamics will still be led by CEO David Wadhwani.
The business of applications was simply becoming too lucrative for Cisco to ignore, per analysts.
“The acquisition broadens Cisco's software portfolio as Cisco attempts to diversify its revenue base with more subscription and recurring revenue,” Pacific Crest Securities’ Alex Kurtz notes in a report.
“The traditional market for application performance management (APM) is roughly $4 billion, but analytics, the shift to cloud deployments and the consolidation of monitoring tools, appears to be expanding the addressable market,” according to Kurtz.
Still, Cisco is no doubt paying a premium for AppDynamics. In late 2015, the startup was valued at $1.9 billion.
AppDynamics will operate within Cisco's Internet of Things division.
The deal is expected to close in Cisco's third quarter of fiscal year 2017.