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Billion Dollar Unicorns: Will IBM Acquire FireEye?

Posted on Thursday, Aug 20th 2015

According to Gartner, the global spending on IT security is projected to grow 8.2% this year to $77 billion. Gartner expects this spend to grow to $101 billion by the year 2018. Billion Dollar Unicorn club member FireEye (Nasdaq: FEYE) is already benefiting from this growth.

FireEye’s Offerings

FireEye was founded in 2004 by Sun Microsystems veteran Ashar Aziz. Based on his experience at Sun, Aziz had identified a gap between the evolution path of malware and the development of a blueprint for defenders. To meet this identified gap, he developed a virtual machine introspection product that could help customers protect their networks from malware that would have otherwise bypassed traditional signature-based defenses. Thus, FireEye was born. Today, FireEye’s offerings supplement existing firewalls, IPS, anti-virus, and gateways by blocking attacks across multiple platforms. Their smart algorithm is able to identify suspicious activity which may not necessarily be an identified malware and prevent cyber invasion.

Since then, FireEye has continued to improve their offerings and market reach through several tie-ups. Within product enhancements, they have added features such as security content support, enhanced compliance logging, and a redesigned reporting dashboard to the FireEye Endpoint Security platform. As part of their effort to drive international expansion, they have also released the FireEye Endpoint Security in multiple languages, including Japanese and German. Recently, they also entered into an agreement with Visa to co-develop tools and services to help merchants and issuers protect against advanced cyber-attacks.

FireEye’s Financials

FireEye recently reported strong quarterly results. Second quarter revenues grew 56% over the year to $147 million, ahead of the Street’s forecast of $143 million. Loss per share was also narrower at $0.78 compared with the market’s target of $0.84 for the quarter. FireEye is yet to post a profitable quarter.

For the current quarter, FireEye projected revenues of $164 million-$168 million with a net loss of $0.44-$0.48 per share. The Street had forecast revenues of $164.3 million with a loss of $0.45 for the quarter. FireEye is hopeful of ending the year with $630 million-$645 million in revenues and $1.70-$1.80 loss per share. The market had been modeling revenues of $631.7 million with a net loss of $1.80 per share for the full year.

Till September 2013, FireEye was venture funded, having raised $101 million in investments from investors including DAG Ventures, Goldman Sachs, Icon Ventures, Juniper Networks, Norwest Venture Partners, Sequoia Capital, Silicon Valley Bank, Vilicus Ventures, Wing Venture Capital, Four Rivers Group, and In-Q-Tel. They went public in 2013 by raising $303.6 million in a round that valued them at $2.3 billion. Despite their losses, they have managed to report strong valuations with their strong product and customer backing.

Their stock is trading at $43.46 with a market capitalization of $6.93 billion. It touched a 52-week high of $55.33 in June this year. Despite the stellar results, the stock had fallen on the news of the departure of their CFO Michael Sheridan who is quitting FireEye to join a startup.

Recent rumors suggest that IBM may be eyeing FireEye for an acquisition. It may be a good move for IBM who wants to establish a big footprint in the cyber security space.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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. Workday's Ramp to Multi-Billion Valuation
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 1)
. ServiceNow's Expanding Market Opportunity
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 2)
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 3)
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 4)
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. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 5)
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