Rumors about Cisco Systems potentially acquiring FireEye are back, but ChannelE2E remains skeptical about the chatter. The reason: FireEye's business model, revenue mix and growth rate don't fit the typical Cisco M&A target profile, ChannelE2E believes.
Still, a number of rumors suggest Cisco will engage with Goldman Sachs on a deal for FireEye, according to SeekingAlpha. A similar rumor in October 2019 suggested FireEye had hired Goldman Sachs to explore a company sale.
Poke around, and you'll notice rumored Cisco-FireEye deals stretch back to 2015, when some pundits suggested a $9 billion buyout was on the way (only... it wasn't).
Fast forward to present day. FireEye's market capitalization is a far less frothy $3.53 billion, though shares jumped about 5 percent today on the latest M&A rumors.
Cisco Acquiring FireEye?: Why ChannelE2E Is Skeptical
No doubt, Cisco is pushing hard into cybersecurity. But ChannelE2E doesn't think FireEye fits into Cisco's typical company profile for acquisition targets.
Meanwhile, FireEye is respected in the cybersecurity market, and the company's software portfolio contains some compelling offerings. The lineup includes a digital threat monitoring service, and multi-cloud container security capabilities.
Still, FireEye isn't a fast-growth business, and it also leans quite a bit on a team of 1,000+ cybersecurity consultants -- a labor cost that can't generate SaaS-type valuations. FireEye's revenue was $235 million in Q4 2019, up 8 percent from Q4 2018, the company said on February 5, 2019. The figure exceeded Wall Street's expectations, but FireEye also offered a mixed Q1 2020 outlook at the time, SeekingAlpha notes.
Also of note: FireEye's direct sales force and security consulting services have caused channel partner conflict from time to time -- a reality that Cisco partners may not welcome.
Cisco's Existing Security Business
Meanwhile, Cisco's overall security revenue rose 9 percent in the company's most recent quarter with strong performance in identity and access, advanced threat and unified threat management areas, CFO Kelly Kramer told Wall Street analysts during an earnings call yesterday.
Every company in the Fortune 100 now uses one or more Cisco security solutions, Robbins added during that earnings call.
As for the FireEye rumor, ChannelE2E has not heard any definitive chatter suggesting that Cisco is preparing to acquire the company. If that changes, we'll be sure to update this blog.
PS: Barron's agrees with ChannelE2E's assessment, reporting that there's no truth to the Cisco-FireEye rumor.