Please ensure Javascript is enabled for purposes of website accessibility

6 Things You Didn't Know About FireEye, Inc.

By Leo Sun - Mar 17, 2017 at 8:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Did you know these six things about the struggling cybersecurity company?

Tech investors might recognize FireEye (MNDT 0.41%) as the hot cybersecurity IPO from 2013 that fizzled out over the following years. After going public at $20, FireEye soared to the mid-$80s before concerns about its valuation, lack of profits, cash burn rate, and a secondary offering torpedoed the stock.

FireEye now trades at about $10, and its sales growth has flatlined, with analysts expecting just 1% sales growth this year. I've discussed the many shortcomings of FireEye's business model before, but today I'll focus on six lesser-known facts about this struggling cybersecurity firm.

A businessman touches a cloud of virtual padlocks.

Image source: Getty Images.

1. The first cybersecurity firm certified by Homeland Security

In 2015, the U.S. Department of Homeland Security certified FireEye's Multi-Vector Virtual Execution (MVX) engine and Dynamic Threat Intelligence (DHI) cloud platform under its SAFETY Act.

That made it the first cybersecurity company to achieve SAFETY certification for its products, and reinforced its reputation as a "best in breed" threat prevention solutions provider. That's why FireEye was asked to investigate high-profile data breaches at Target, JPMorgan, Sony, and other companies over the past few years.

2. Its core technologies came from an acquisition

FireEye was founded in 2004 as a security appliance maker, but it wasn't considered a major threat prevention player until it acquired Mandiant for $1 billion in 2014. Mandiant was founded by current FireEye CEO Kevin Mandia, and used digital forensics and an aggressive "SWAT team" approach to contain data breaches. Mandiant rose to prominence in early 2013 after it published a report which implicated China in cyber espionage activities.

FireEye's threat detection map.

Image source: FireEye.

3. Its founder has left the company

FireEye's founder Ashar Aziz, who has been frequently hailed as a "technical visionary," orchestrated the company's early development of security appliances and oversaw its acquisition of Mandiant. Prior to founding FireEye, Aziz worked at Sun Microsystems (now part of Oracle) as an engineer and CTO.

That's why Aziz's abrupt resignation from FireEye's board of directors last August stunned investors. FireEye said that Aziz's departure wasn't caused by any disagreements with the company, but rather a "desire to spend more time with his family here and abroad, and also to pursue new projects."

4. Its former CEO loved buyouts

In 2012, FireEye hired Dave DeWalt, the former CEO and President of McAfee, as its CEO to prep the company for its IPO. DeWalt had a reputation for orchestrating buyouts -- he engineered the sales of Documentum to EMC in 2003, and McAfee to Intel in 2011. Neither company turned out to be a great deal for the buyers -- EMC sold Documentum this January, and Intel agreed to sell a majority stake in McAfee (rebranded as Intel Security) last September.

As FireEye dipped below its IPO price in late 2015, many investors speculated that DeWalt would also try to sell the company. However, DeWalt resigned last June and was replaced by Mandia, which suggests that quick buyouts are now off the table.

5. It turned down several buyout offers

Shortly after DeWalt's departure, reports claimed that several major suitors, including Cisco and Symantec (NLOK -1.52%), had tried to buy FireEye. A Bloomberg report claimed that FireEye had rebuffed the offers because they were lower than its expected buyout price of $30 per share.

A Reuters report from earlier this year claimed that FireEye ended buyout talks with Symantec shortly after Mandia took over due to disagreements over the price. That time frame indicates that the talks occurred after Symantec announced the acquisition of BlueCoat for $4.7 billion, but before it agreed to buy LifeLock for $2.3 billion.

6. It's settling a big class action lawsuit

It probably isn't surprising that FireEye is being sued by its investors. The company was hit by multiple class action lawsuits in 2014 after its secondary offering triggered a steep sell-off. The plaintiffs also allege that FireEye execs made misleading claims about the effectiveness of its threat prevention technologies.

The Register recently reported that FireEye plans to settle these lawsuits for $10.2 million. That would only account for 1.4% of its projected revenues for the year, but it would also represent the second largest recovery ever achieved in a case argued in a California state court under the Securities Act of 1933. The settlement would also inevitably tarnish FireEye's reputation.

The key takeaways

FireEye might look like a tempting contrarian play, but the company is in serious trouble. It isn't pivoting from appliances to cloud-based services quickly enough to boost its top line growth, and Mandia's plan to grow margins by laying off employees could dull FireEye's competitive edge. Several of the facts I discussed in this article support that bearish case and indicate that FireEye might not ever revisit its IPO price again.

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Mandiant, Inc. Stock Quote
Mandiant, Inc.
MNDT
$21.82 (0.41%) $0.09
Intel Corporation Stock Quote
Intel Corporation
INTC
$37.41 (0.32%) $0.12
Target Corporation Stock Quote
Target Corporation
TGT
$141.23 (-0.47%) $0.67
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$112.61 (-2.33%) $-2.69
Dell EMC Stock Quote
Dell EMC
EMC
NortonLifeLock Inc. Stock Quote
NortonLifeLock Inc.
NLOK
$21.96 (-1.52%) $0.34
Cisco Systems, Inc. Stock Quote
Cisco Systems, Inc.
CSCO
$42.64 (-0.56%) $0.24
Sony Corporation Stock Quote
Sony Corporation
SONY
$81.77 (-1.97%) $-1.64
Oracle Corporation Stock Quote
Oracle Corporation
ORCL
$69.87 (0.95%) $0.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.