Cisco, one of the major manufacturers of networking hardware and telecommunication equipment, has today announced the acquisition of AppDynamics, which is an application performance management software company. The deal is said to be worth $3.7 billion.

AppDynamics had previously raised $314.5 million and was most recently valued at $1.9 billion. So, the exit looks like it’s about a two-fold jump from its previous valuation — which is not all that bad of an outcome in the scope of larger enterprise deals.

While the acquisition has already been announced, the deal is expected to close in the third quarter of Cisco’s 2017 fiscal year. After the acquisition closes, AppDynamics chief executive David Wadhwani will remain in charge of the said software business unit and will now report to Cisco’s Senior VP Rowan Trollope.

This move is rare and surprising as AppDynamics raised the price range for its shares from $10-12 to $12-14. The APM company was aiming to raise $156 million in the deal. Cisco corporate development head Rob Salvagno wrote in a blog post,

Together with Cisco’s industry leading digital network architecture, customers will now have unprecedented end to end insight across their technology stack, from infrastructure to application. 

With this insight, companies will be equipped to improve customer experiences and accelerate revenue opportunities. The acquisition of AppDynamics also supports Cisco’s strategic transition toward software-centric solutions that deliver predictable recurring revenue.

AppDynamics helps users to monitor the performance of business applications, which help them get a deeper look into the guts and inner workings of their applications. This, in turn, offers them to effectively spot chokepoints and performance issues that may potentially be holding back transactions and other kinds of action. The idea there is to catch problems before they become major issues and humongous headaches for the company.

This move further broadens the capabilities of Cisco, which already specializes in data center networking hardware. This, however, isn’t the first major acquisition for the company. It had earlier bought Internet of Things (IoT) company Jasper for $1.4 billion.

AppDynamics, on the other hand, is already competing with the likes of New Relic, and the acquisition will bring Cisco into even further and deeper competition with other software providers in the space.

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