Cisco is to sink $3.7 billion into acquiring US software firm AppDynamics, as the company attempts to grow beyond its traditional core networking business and keep pace with developing technology.
AppDynamics, which has around 2,000 paying subscribers to its application management software, was in the planning stages of its IPO before Cisco made the substantial offer, which is almost double the $1.9 billion valuation AppDynamics received in November 2015.
Customers of the San Francisco-based company include NASDAQ, Nike, Kraft and Cisco itself.
The acquisition, which is set to close in April 2017, represents a move away from legacy system hardware to stay ahead of new emerging technology, including cloud computing and Internet of Things. HPE made a similar move last week when it announced it would be buying cloud firm SimpliVity for $650 million.
"The combination of Cisco and AppDynamics will allow us to provide end to end visibility and intelligence from the network through to the application; which, combined with security and scale, [will] help IT to drive a new level of business results," said Rowan Trollope, senior VP at Cisco and general manager of Cisco's IoT business group.
AppDynamics will continue to be led by CEO David Wadhwani, but will now operate as a software business unit under Rowan Trollope's IoT group. It will join Cisco's last acquisition, Jasper, a cloud-based software company bought in February 2016 for $1.4 billion.
President Donald Trump's new plan to incentivise US companies to repatriate overseas cashflows may create a wave of similar acquisitions over the next year, according to analysts speaking to Reuters.
"With digital transformation, companies must re-define their relationships with customers through software. We're excited to join Cisco, as it will enable us to help more companies around the globe," said AppDynamics CEO David Wadhwani.
In an interview with Fortune, Cisco head of acquisitions Rob Salvagno explained that Cisco was seeking to acquire the company's talent and not just its technology, but failed to confirm if all 1,200 employees would be making the move to Cisco.
"We are buying AppDynamics because we fundamentally believe that they are redefining the application space," said Salvagno. "We want to turbo charge that. I do think we try to think about the market transition that is affecting out customers and to really capture those market transformations that are in front of most of our peers."
