Sorry, IPO Fans: Cisco Buys AppDynamics Two Days Before It Was To Go Public

Cisco Systems, Inc. (NASDAQ: CSCO) on Tuesday night announced plans to acquire AppDynamics, a privately held Application Intelligence Software company that was about to go public.

The purchase could add up to 1 point of top-line growth for Cisco in FY 2018, Deutsche Bank's Vijay Bhagavath said in a report. He maintained a Buy rating on the company, with a price target of $37.

Cisco indicated a purchase price of $3.7 billion in cash and assumed equity awards. The company expects the deal to close in its April quarter [Q3 FY 2017], Bhagavath noted.

Performance Of AppDynamics

AppDynamics generated top-line growth of 54 percent year-over-year and Billings growth of 44 percent year-over-year in the nine months ended October 31, 2016. Revenues and Billings for this period came in at $158 million and $237 million, respectively. The privately-held indicated a TAM [total addressable market] in the $12 billion range.

“While AppDynamics is currently operating at a loss, we believe the deal, on a pro-forma basis, could add up to 1 point of Top Line growth for CSCO in FY18 (assuming AppDynamics ramps up to a $100M a quarter run rate; ~50% Top Line CAGR),” Bhagavath wrote.

Integration With Cisco

AppDynamics would be integrated into Cisco’s Internet of Things [IoT] and Applications business.

“A core capability that AppDynamics brings to CSCO’s IT customer base is real time analytics, monitoring, and visibility at the Infrastructure and Application layers and “correlating” IT metrics with Business Transactions,” the analyst mentioned.