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 firstname.lastname@example.org and Dana Cimilluca at email@example.com
(END)Dow Jones Newswires
January 24, 2017 21:16 ET (02:16 GMT)
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