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What happened?
Along with preliminary fourth-quarter earnings, cybersecurity specialist FireEye (NASDAQ:FEYE) announced that it has acquired threat intelligence leader iSIGHT Partners. The deal closed a week ago on Jan. 14. FireEye says that the deal will translate into stronger alerts, greater context to prioritize threats, and other insights to proactively handle cyber attacks. iSIGHT operates a broad intelligence network that seeks out cyber threats across numerous countries.

FireEye paid for the purchase with $200 million in cash, and previous iSIGHT shareholders (iSIGHT was privately held) will receive an additional $75 million in cash and stock if iSIGHT achieves certain performance targets.

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Does it matter?
FireEye has fallen dramatically in recent months on competitive fears. The company previously blamed improving relations with China on reduced cyber threats, which hurt demand for its products. But cybersecurity rivals said they aren't seeing reduced demand, undermining FireEye's claims.

Making an acquisition to beef up its cybersecurity suite and improve competitive dynamics is the right call, especially since it's a reasonable price tag. At the end of last year, the company had nearly $1.2 billion in cash and equivalents on the balance sheet, so this purchase will take a chunk out of that total. But with FireEye shares trading at 52-week lows, it also doesn't make sense for the company to use its equity as currency in a deal like this, making the cash payment appropriate. FireEye also says it expects to generate positive operating cash flow in the fourth quarter of $7 million to $9 million.

Evan Niu, CFA owns shares of FireEye. The Motley Fool owns shares of and recommends FireEye. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.