Cisco to Buy AppDynamics for $3.7 Billion -- Update
January 24 2017 - 9:31PM
Dow Jones News
By Rachael King and Dana Cimilluca
Cisco Systems Inc. is buying software company AppDynamics Inc.
for $3.7 billion, plucking the startup from IPO registration at a
big premium in an effort to bolster its software offerings to large
enterprise customers.
AppDynamics, whose software helps companies including Cisco
monitor the performance of their applications, was gearing up to be
the first tech company to go public this year. The company was
expected to price Wednesday night, and earlier Tuesday bankers
increased the IPO's estimated price that would have valued
AppDynamics at as high as about $2 billion.
Cisco agreed to pay about $26 a share, according to a person
familiar with the matter, well above the company's original price
range of $10 to $12 a share.
Under CEO Chuck Robbins, Cisco has placed increasing importance
on software. The company has long held a dominant share of sales of
the routing and switching equipment used to funnel data over the
internet and between computers in data centers. As competitors
enter the market with less expensive options, Cisco has focused on
other business lines such as security, collaboration and the
"Internet of Things."
Cisco's price nearly doubles the $1.9 billion valuation that
AppDynamics' investors placed on the company in late 2015. Those
backers include venture firms Greylock Partners and Lightspeed
Venture Partners, which each owned 20.8% of AppDynamics valued in
the deal at over a half-billion dollars.
AppDynamics had originally planned its debut for December but
postponed the offering due to uncertainty following the U.S.
presidential election. The company was set to lead an expected
charge of IPOs after one of the slowest years for new U.S. listings
in more than a decade.
The startup was founded in 2008 by veteran startup engineer
Jyoti Bansal, who saw that companies were becoming more reliant on
increasingly complex software. Customers such as airlines, banks
and retailers use the software to monitor the performance of their
applications to ensure they are running smoothly.
In the first nine months of 2016, AppDynamics lost about $95
million on revenue of $158 million, up about 54% from a year
earlier.
Mr. Bansal has since become chairman of AppDynamics. Its CEO,
David Wadhwani will continue to lead AppDynamics, as a new software
unit in Cisco's Internet of Things and Applications business.
Write to Rachael King at rachael.king@wsj.com and Dana Cimilluca
at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
January 24, 2017 21:16 ET (02:16 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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