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Why FireEye Might Be a Potential Takeover Target in 2017

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Feb. 6 2017, Updated 9:06 a.m. ET

Factors contributing to FireEye’s attractiveness as a takeover target

Earlier in the series, we learned that Cisco’s (CSCO) recent acquisition of AppDynamics might open a floodgate of M&A in the technology space. FireEye (FEYE) is likely to be a potential takeover target in the ongoing M&A trend in 2017.

FireEye offers company-specific appliance offerings and other offerings that include NX (network security), AX (malware analysis), HX (endpoint security), EX (email security), FX (file content security), and endpoint forensics. All these offerings are integrated to a threat intelligence and analytics platform. In the last one year, FireEye stock has lost ~8% of its value. The fall is even more pronounced if we consider the past three years, during which it has lost close to 78% of its value.

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Over the past couple of years, the steep decline in FireEye’s stock as well as the company’s attractive offerings have increased its attractiveness as a takeover target. Leading technology players such as IBM (IBM), Cisco, and Dell are taking an interest in the security software and services space. FireEye is likely to catch tech players’ attention in the coming future.

The changing face of the enterprise security space has prompted these companies to acquire smaller companies and startups with disruptive technologies in order to gain a competitive edge over their peers. By purchasing a smaller company that has a novel approach toward network security, the acquiring company can offer an exhaustive suite of offerings to customers.

Cybersecurity space set to see increased spending and expansion in 2017

With President Donald Trump now in power, cybersecurity is likely to be the highlight of the technology industry in 2017. Cybersecurity’s importance in Trump’s action plan is evident in the policy section of Trump’s website, where it reads: “order an immediate review of all U.S. cyber defenses and vulnerabilities.” The US government’s spending on cybersecurity is forecasted to reach $19 billion in fiscal 2017. In a research paper, Morgan Stanley (MS) noted that in 2012, President Obama identified cybersecurity as “one of the most serious economic and national security challenges we face as a nation.”

According to Cybersecurity Ventures’s 4Q16 report, the global cybersecurity space is expected to grow at a CAGR of 9.8% from ~$106.3 billion in 2015 to ~$170.2 billion by 2020. Approximately $1 trillion is expected to be spent globally on cybersecurity from 2017–2021.

Thus, increased spending on cybersecurity is likely to benefit FireEye, which is the prominent player in this space. FireEye is set to announce its fiscal 4Q16 results on February 2, 2017.

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