Cisco Buys 45th Company in 5 Years, Revenues Still Stagnate

wolfstreet.com / by Wolf Richter / Jan 26, 2017

Have Cisco’s Financial Engineers Gone Nuts?

Cisco is, let’s say, in transition. It has been in transition for years, from networking hardware, such as switches and routers where it’s getting battered by Chinese competition, to software where it’s getting battered by… well you get the idea. The company is in a very competitive environment. And it’s trying to buy its way out of it.

In its latest move, it announced that it would acquire AppDynamics – a “performance management and IT operations analytics company,” as it says – for $3.7 billion, plucking it out from the IPO pipeline on the eve of its IPO.

That’s a huge premium over an already rich IPO price. If bankers had priced the shares at the top of the indicated IPO range, the company would have gone public at a valuation of $1.7 billion. Cisco paid over twice that.

“The fact that they were in their IPO process represented a window where we needed to make a decision,” Cisco’s VP of Corporate Development, Rob Salvagno, told Reuters in an interview.

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