What FireEye Really Gets With This iSIGHT Acquisition

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FireEye Inc. (NASDAQ: FEYE) counteracted the horrific day we saw in the broad markets with some M&A and solid guidance. The company announced its preliminary financial results for the fourth quarter of 2015, as well as the acquisition of global threat intelligence leader iSIGHT Partners.

Overall, fourth-quarter total billings, total revenue and loss per share are expected to be within previously issued guidance ranges.

Specifically, total fourth-quarter revenue is expected to be in the range of $184 million to $185 million and billings are expected to be within the range of $256 million to $257 million. Further, FireEye also expects positive operating cash flow in the range of $7 million to $9 million for the fourth quarter, resulting in positive operating cash flow of between $35 million and $37 million for 2015.

The consensus estimates from Thomson Reuters call for a net loss of $0.37 per share on $186.88 million in revenue.

David DeWalt, chairman of the board and CEO at FireEye, commented:

We posted solid results in our fourth quarter. We have built a powerful platform to combat advanced threats, and we will continue to expand with new products and subscriptions, including new subscriptions based on iSIGHT Partners threat intelligence. While we will provide a more complete picture of our 2016 outlook when we release our full Q4 and 2015 financial results on February 11th, we expect we can grow billings organically by 20 percent and achieve positive free cash flow for 2016. At the same time, we will remain focused on continued progress on our path to profitability.

Separately, FireEye announced that it would acquire iSIGHT Partners. The transaction closed on January 14. With this acquisition, FireEye will created a advanced and comprehensive private cyber threat intelligence operation. Customers of both companies will benefit from lower business risk through higher fidelity alerts, context to prioritize threats and the strategic insights to proactively prepare for threats that might target their industry or region.

Under the terms of the merger agreement, FireEye will pay approximately $200 million in cash to the former iSIGHT shareholders for 100% of the outstanding shares of iSIGHT. Also former iSIGHT shareholders will have the opportunity to earn an additional amount of $75 million in cash and equity upon the achievement of a threat intelligence bookings target on or before the end of FireEye’s second quarter of 2018.

Shares of FireEye closed Wednesday down 2.4% at $14.87, with a consensus analyst price target of $32.35 and a 52-week trading range of $13.33 to $55.33. Following the release, the stock was up 5.3% at $15.66 in the after-hours trading session.