Why Is FireEye’s Growth Slowing amid High Cybersecurity Demand?


Nov. 6 2015, Published 5:07 p.m. ET

Growth opportunities in the cybersecurity space

Previously in this series, we discussed FireEye’s (FEYE) performance in fiscal 3Q15 as well as its slowing revenue growth. However, this counters the general trend. The rise in cyber threats, data breaches, and network attacks has convinced companies to increase investments in security. Companies want to become proactive rather than responsive to high-profile attacks.

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Corporate spending on cybersecurity is poised to grow

According to Gartner, a research firm, global spending on information security technology is expected to grow from ~ $77 billion in 2015 to $108 billion in 2019. Bob Ackerman, security expert and founder of Allegis Capital is of the opinion that cyber attacks will only increase from here. Corporate budgets for cybersecurity spending are bound to grow regardless of the state of the economy. Please read SMAC and BYOD Are Fueling Growth in Cybersecurity Space to learn how these trends are fueling growth in the IT (information technology) sector.

In 2Q15, network security players Check Point Software Technologies (CHKP), Cisco Systems (CSCO), Fortinet (FTNT), and Palo Alto Networks (PANW) all witnessed double-digit growth. Palo Alto Networks, which went public in 2012, is trading ~$185 a share, five times its IPO (initial public offering) price in 2012.

The expected growth in the cybersecurity space should bode well for FireEye, a company known for its “purpose-built, virtual machine-based security platform.” However, considering its prior quarters’ revenue growth, this does not appear to be the case. FBR Capital Markets analyst Daniel Ives observed that “it’s not like it’s raining across the sector, it’s only raining on FireEye’s head.”

FireEye made news when it announced its acquisition of Mandiant in January 2014. Mandiant was the security company that publicly detailed the Chinese (MCHI) military’s involvement in hacking attacks against the United States for the first time.


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