Symphony Technology Group, which is buying FireEye, already owns multiple security companies “with redundancies in numerous areas.”

Security analysts expect that FireEye’s decision to sell off its products business will help accelerate growth of the company’s current Mandiant software and services group — while creating some uncertainty for customers of its network, email, endpoint, and cloud security products.

FireEye Wednesday announced it had agreed to sell its products business — and brand name —  to private equity firm Symphony Technology Group (STG) for $1.2 billion. The agreement is expected to close by year-end and will result in FireEye’s security products and related management and orchestration technologies being peeled away from Mandiant’s security intelligence and incident responses services business.

When complete, the transaction will result in an independent Mandiant Solutions company focused on a range of security consulting, managed defense, threat intelligence, and validation services. FireEye’s products, meanwhile, will be folded into a broader and rapidly growing portfolio of legacy security products that STG has acquired in recent years.

“Unfortunately, the future for the FireEye products business and its employees and customers now becomes highly uncertain,” says Eric Parizo, an analyst at Omdia.

STG already owns multiple companies, including hybrid cloud security posture management vendor Redseal and long-troubled vendor RSA Security. STG is also set to close on its $4 billion acquisition of the McAfee enterprise unit later this year.  

“Upon close, the addition of the FireEye products group will give STG a massive enterprise security portfolio, but one with redundancies in numerous areas, including endpoint security, SIEM, network forensics, malware sandboxing, and many others,” Parizo says.

Kevin Mandia, CEO of FireEye and founder of Mandiant, will retain his chief executive role at the new Mandiant. Bryan Palma, who is currently executive vice president of FireEye, will lead the company when the transaction is complete. In a blog Thursday, Mandia described the planned separation as optimal for both businesses and one that would result in little disruption for customers.

“A joint reseller agreement will enable the FireEye and Mandiant sales teams to continue offering our integrated solutions,” Mandia said. Mandiant and FireEye have also established mutual processes for protecting customer data and ensuring both sides have the resources required to deliver on customer commitments, he noted.

If approved, the transaction will end what analysts describe as an incompatible relationship, at best, between FireEye and Mandiant ever since the former acquired the latter in December 2013 for around $1 billion.

“The DNA of Mandiant and the DNA of FireEye just didn’t mix,” says John Pescatore, director of emerging security trends at the SANS Institute.

Mandiant’s history and strengths have been purely as a security services player, while FireEye’s heritage has been in the products space. Though there are past examples where product companies successfully purchased and integrated a services business, with FireEye and Mandiant there really was no such effort, he says.

“What it comes down to is they never really combined the two companies,” Pescatore says.

Splitting the businesses gives Mandiant an opportunity to get back to what it does best. For FireEye the transaction will provide access to cash it can use to bring in a good product management team, Pescatore says.

Writing on the Wall
According to Parizo, the writing has been on the wall for quite some time. FireEye’s product business has been a drag on Mandiant’s services business, he says. Mandia and his team likely recognized that FireEye’s appliance-based business offered little prospects for long-term revenue growth. In fact, as of late 2020, billings and revenue from FireEye’s product business were down 15% compared with two years ago.

There has been increasing friction internally between the products and services group at FireEye, he says.

“There’s no question the STG deal was prompted by Mandia,” Parizo says.

Mandia and John Watters, FireEye’s very recently hired president and COO, both have a long history in the services space and wanted to get back to their roots by shedding the struggling products unit, he says.

“I think it will prove to be a strong move for the future Mandiant,” Parizo adds. “The company will be able to focus on the delivery of security services.”

The transaction also broadens STG’s footprint in the legacy security product business. In recent years, the company has made some important acquisitions at relatively bargain prices by going after low-growth but still profitable businesses, says Scott Crawford, research director at S&P Global Market Intelligence. For example, if the FireEye transaction goes through, STG will have picked up the company at a value just over 2.2 times its revenues in an industry where the average multiple for security deals is between seven times and nine times revenue, he says.

“Private equity firms know there is still value to be had from these legacy security product fiefdoms,” Crawford says.

However, the longer-term prospects for pure-play security vendors of the sort that STG has acquired are somewhat murky because cloud vendors, operational technology providers, and others are increasingly integrating core security capabilities into their technologies, he says.

Jai Vijayan is a seasoned technology reporter with over 20 years of experience in IT trade journalism. He was most recently a Senior Editor at Computerworld, where he covered information security and data privacy issues for the publication. Over the course of his 20-year … View Full Bio

 

Recommended Reading:

More Insights



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here