What happened

Shares of FireEye (MNDT) were down 16.2% Friday as of 12:40 p.m. EDT following the company's second-quarter 2021 earnings report. Results weren't all bad for the cybersecurity company, but the steep drop in stock price is due to uncertainty on its path forward following the sale of its products segment to private equity firm Symphony Technology Group for $1.2 billion.  

So what

FireEye's revenue from continuing operations (the company's subscription software service Mandiant Solutions that remains after the sale of its network, email, endpoint, and cloud security products) was $114 million in Q2, up 17% year over year. Adjusted operating margin was negative 26%, though, significantly higher than expected from restructuring costs and other expenses related to the divestiture.

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The good news is that the refocusing of attention on the fast-growing Mandiant software business is showing early signs of paying off. Should the products segment have been included in FireEye's results, year-over-year sales growth would have been only 8% -- although the adjusted operating margin would have been only negative 10%.  

Now what

FireEye will need to continue working through expenses related to its restructuring. The outlook for the third quarter is calling for a sequential increase in sales to between $118 million and $122 million, but another steep loss with adjusted operating margin expected to be negative 27% to negative 29%.  

The security software firm is well armed to make this transition. It ended June with $1.25 billion in cash and short-term investments and only $440 million in short-term convertible debt. The stock is likely to remain volatile for now until FireEye's financials stabilize, but the sale of its products division bodes well for its growth trajectory.  

Shares have declined 27% so far this year after the post-earnings plunge. If FireEye can demonstrate consistently higher growth and work its way back to profitability, this short-term tumble could present a long-term value since FireEye is actually profitable on a free cash flow basis ($30.8 million generated in the quarter).