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How FireEye’s Valuation Stacks Up against Its Peers


May. 16 2017, Updated 7:35 a.m. ET

Cloud security spending to drive M&A spree

Earlier in the series, we discussed FireEye’s (FEYE) transition to cloud and how it generates hope among its investors. The expected increase in cybersecurity and cloud spending encouraged big players like Cisco Systems and Symantec to adopt the acquisition route to expand in this space.

Cisco Systems (CSCO) has continued its cloud-related acquisition spree. Last week, it announced the acquisition of Viptela, a cloud-based networking startup, for $610 million. Viptela is known for its software-defined system that enables enterprises to manage their networks across the hybrid cloud. CliQr, Jasper Technologies, Lancope, Alcano, and CloudLock are some of the other acquisitions that Cisco made or announced in 2016.

Symantec (SYMC), a leader in the global security software space, strategically chose to acquire Blue Coat Systems for ~$4.7 billion in 2016 to boost its position and to tap into the increasingly competitive security market.

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Cybersecurity is in vogue in 2017

With its unique offerings that can detect advanced hacking attacks, coupled with its still-low valuations despite getting some relief from its 1Q17 results, FireEye makes an attractive takeover target. In particular, it could be targeted by technology companies such as Cisco Systems that are looking to build their security offerings. FireEye also appears to be underrated, as the chart above shows.

Industry publication eWEEK cited Tom Kellermann, CEO of Strategic Cyber Ventures, who said, “Cyber-security is foundational to brand protection, and I would suggest that by 2020 the total annual investment in cyber-security will exceed $200 billion.”

Kellerman added, “By 2020 corporations will be held accountable for the security of their networks by not only regulators but by the courts as well.”

Investors who wish to gain exposure to the cybersecurity space can consider investing in the PureFunds ISE Cyber Security ETF (HACK). HACK has a portfolio of 32 stocks and invests ~5% of its holdings in FireEye.


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