BOSTON Jan 2 Cybersecurity company FireEye Inc
, one of last year's hottest IPOs, has acquired Mandiant
Corp, the computer forensics specialist best known for unveiling
a secretive Chinese military unit believed to be behind a series
of hacking attacks on U.S. companies.
The $1.05 billion cash-and-stock deal, which FireEye said
closed on Monday, unites two companies with relatively new
technologies for thwarting cyber attacks, and brings together
two of the most-respected executives in the security industry:
FireEye CEO Dave DeWalt and Mandiant founder Kevin Mandia.
While sales of older anti-virus products have been on the
decline, security experts expect strong growth in both FireEye's
cloud-based systems for detecting malicious software and
Mandiant's software that analyzes cyber attacks.
About a year ago the two companies entered into a technology
development agreement that made it easier to deploy their
products together. With the merger, FireEye will gain Mandiant's
team of forensics investigators.
"They have these very strong Navy 'cyber' Seals who respond
to breaches and are very good at what they do," DeWalt said
about Mandiant. He had previously served as chairman of
"My aim is to create the strongest security company in the
world," DeWalt said in an interview.
FireEye, which has yet to post a profit, said the
acquisition will be immediately accretive to earnings and
expects the combined company's revenue to grow about 50 percent
this year. In comparison, Symantec Corp, the biggest
maker of anti-virus software, has said it expects fiscal 2014
revenue to drop 3 percent to 4 percent.
Mandiant is best known for its forensics services. The
company rose to prominence in February 2013 when it published a
report detailing alleged links between a Shanghai-based unit of
the People's Liberation Army and a long list of attacks on U.S.
companies.. Beijing denied all allegations in
STOCK AND CASH
Mandiant, which has long been profitable, generates sales of
more than $100 million a year, according to DeWalt.
FireEye in November forecast its 2014 revenue to be between
$240 million and $250 million, up from an estimated $156 million
to $158 million for 2013. DeWalt has declined to say when he
expects the company to be profitable.
FireEye, which has a market capitalization of around $5
billion, will pay for Mandiant with a combination of stock and
cash. It issued 21.5 million shares and options, which were
worth $939 million on Monday, when the stock closed at $43.69.
A company spokesman said it had about 140 million shares
outstanding after the deal was completed.
It will also pay $106.5 million in net cash to Mandiant's
shareholders, who include Mandia as well as Silicon Valley
venture capital firm Kleiner Perkins Caufield & Byers and One
Equity Partners, the private investment arm of JPMorgan Chase &
DeWalt said he owns some shares in Mandiant and will
disclose the size of his stake within a few days through a
filing with the Securities and Exchange Commission.
FireEye shares were down 5.7 percent to $41.11 in late
afternoon Nasdaq trade. They nearly doubled in their Sept. 20
trading debut and have not moved significantly since.
FireEye's rival include Palo Alto Networks Inc,
which went public in 2012 in one of that year's most successful
Mandiant was founded in 2004 by Kevin Mandia, a former U.S.
Air Force cyber-forensics investigator who co-authored an
influential textbook on the subject. The company made its name
by automating processes used to investigate computer breaches.
The company was largely unknown outside the computer
security world until February of last year, when it fingered the
People's Liberation Army's Shanghai-based Unit 61398 as the most
likely driving force behind a Chinese hacking group known as
Other security companies had published reports on
cyberattacks, but had shied away from so clearly identifying
DeWalt said FireEye would consider releasing similar reports
now that it owns Mandiant.
"You will probably see us continue to do it when it is
appropriate," he said. "There is some incredibly egregious
DeWalt is the former chief executive of anti-virus software
maker McAfee who sold McAfee to Intel Corp.
Mandia was named FireEye's chief operating officer. He said
in an interview that he plans to move to Silicon Valley, where
FireEye has its headquarters, from the Washington D.C. area.
"I'm in this for the long-term," he said. "This is as
exciting as heck for me."