FireEye's X15 Software Buyout Brings Big Data To Security

FireEye, Inc. (NASDAQ:FEYE) recently announced the acquisition of X15 Software with an aim to incorporate the latter’s Big Data platform to its security solutions against cyber attacks. FireEye will be paying $15 million in equity and $5 million in cash for the acquisition per the terms of the transaction.

X15 Software, which was founded in 2013 by Val Rayzman, has offices in California and India. The company currently employs around 20 employees who after this acquisition will work from their current locations.

Details of the Deal

At a time when data generation is increasing at an exponential rate, management of the data to extract useful trends, patterns or information has become important.

X15 Software’s Big Data platform assists in collecting, retrieving and analyzing huge volumes of machine generated data in a scalable fashion in real time, per the press release. Hence, the buyout is anticipated to enhance FireEye’s abilities of managing security related data for better decision making, thereby helping its clients to counter the risks against them more effectively.

Apart from adding capabilities related to big data management, X15 Software will also be adding a single management console for on-premise, hybrid and pure cloud environments including the likes of Amazon (NASDAQ:AMZN) Web Services, Microsoft (NASDAQ:MSFT) Azure, Google (NASDAQ:GOOGL) Cloud Platform as well as Oracle (NYSE:ORCL) Cloud. Given the varied adoption of different cloud platforms by organizations, this feature will be a lucrative addition.

This acquisition is anticipated to be a good buy for FireEye as the application of Big Data and machine learning in cyber security is increasing. This will eventually boost the adoption of the company’s offerings and benefit its top line.

We believe impressive financials will help the company to rebound, which has otherwise underperformed the industry in the last six months. FireEye stock has gained 0.5% in the last six months, underperforming the 3.3% rally of the industry it belongs to.

FireEye’s Overall Performance

Notably, for the past several quarters, the company has been losing business to its rivals. FireEye faces stiff competition from other well-established players such as Check Point Software (NASDAQ:CHKP) and Fortinet (NASDAQ:FTNT) in the cyber security space.

FireEye’s management has been striving to turn the business around through a string of initiatives, which includes product launches, acquisition and cost optimization. We consider that FireEye’s turnaround strategies are paying off as reflected from its back-to-back three quarters of splendid results.

However, the company’s guidance for the ongoing quarter fell short of analysts’ expectations, which has been a drag. Although a shift from product-based to subscription-based business model will lead to more stable revenues over the long run, it will have a negative impact on FireEye’s near-term results, which is a headwind for the company.

FireEye carries a Zacks Rank #4 (Sell).

A better-ranked stock in the same industry is NetApp, Inc. (NASDAQ:NTAP) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The stock has an expected long-term EPS growth rate of 11.3%.

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