Almost all large technology companies, if they want to remain relevant and not be left out, must make acquisitions. Cisco Systems (NASDAQ: CSCO), the leading provider of networking equipment, is no exception. The company has long been well-earned, and the software market in recent years has led it to buy a lot of software companies.
Such is the software company AppDynamics, a provider of performance monitoring platform. Cisco announced the agreement to buy AppDynamics January 24 and seemed to match the pattern of a typical Cisco acquisition. Earlier acquisitions include companies such as ContainerX, Container Management Company, and Jasper Technologies, a things Internet platform company. Cisco wants to sell solutions, not in boxes, and even these target acquisitions.
But the acquisition of AppDynamics was strange, and I did if I relied on management to make good decisions. Almost five months later, I still can not believe Cisco bombarded 3.7 billion AppDynamics.
A last minute offer 200-125 dumps on Exams4sure and also at CCNA Routing and Switching dumps.
AppDynamics was aware of an assessment of less than $ 2 billion, not far from its latest $ 1.9 billion private assessment. The day before the shares are not offered to the public, Cisco entered and bought the company. The negotiations have lasted 72 hours, Cisco has finally agreed to pay $ 3.7 billion in cash and assumed capital awards.
For AppDynamics, there was no negative result. If a transaction does not occur, the company has been public, which would give investors impressive upfront returns. With the stock's potential to grow after its IPO, the company needed Cisco's great importance to justify its sale.
If Cisco had tried to buy from the company several months ago, before the IPO process, it would probably have a better market. Cisco may also have expected the company to make its public entry, buying at a lower price if the stock is not doing well. Instead, Cisco paid nearly double the last private evaluation, buying at a time when it had no bargaining power whatsoever.
The price paid by Cisco AppDynamics was excessive, to say the least. The company generated a turnover of 158 million in the first nine months of 2016, which has generated about 234 million dollars in revenue for the full year if its growth rate has increased. Cisco paid a huge sale 16 times. The company is not profitable, losing $ 95 million in the first nine months of 2016.
The acquisition of companies that lose money for multiple multiples is in my book if the acquisition is small and the goal is to integrate the technology of the acquired company. A large technology company like Cisco can not prosper in the long run without making acquisitions, and these acquisitions are usually not cheap. But when the price is measured in a billion dollars, I hope that Cisco considers its options. Paying almost double the price of the IPO set on the eve of the IPO in a hurried deal seems to be a bad decision for me.
I am always a shareholder of Cisco, and I still think that the stock is a solid investment. But it is important to avoid putting stocks on a pedestal, ignoring mistakes and risks. Hopefully Cisco will be more disciplined with future acquisitions. If you do not, maybe you should reevaluate my investment in the company.
