Mixed results for cyber security firms puzzling

Written by on August 5, 2016 in News with 0 Comments
The Symantec booth is seen during the 2016 Black Hat cyber-security conference in Las Vegas, Nevada, U.S. August 3, 2016. REUTERS/David Becker

The Symantec booth is seen during the 2016 Black Hat cyber-security conference in Las Vegas, Nevada, U.S. August 3, 2016. REUTERS/David Becker

(Reuters) – Cyber security firm FireEye Inc said on Thursday it planned to lay off 300 to 400 of its 3,400 workers as it announced quarterly sales below its own forecast, due to a slowdown in demand for its services helping businesses respond to hacking attacks.

FireEye’s shares were down 16.2 percent at $14.02 in extended trading.

The Milpitas, California-based company also cut its full-year sales outlook.

Chief Financial Officer Michael Berry told Reuters that the job cuts were part of a restructuring effort that will reduce annual costs by about $80 million.

Chief Executive Kevin Mandia said the company is now responding more frequently to financially driven cyber criminals, who engage in crimes such as ransomware, which are relatively simple to clean up.

“The size and scope have changed. The whole remediation was more complex” when the company was responding to large numbers of state-sponsored hacks from China, he said.

FireEye cut its full-year revenue forecast to $716 million-$728 million from $780 million-$810 million.

The company is still targeting non-GAAP profitability by the end of 2017 and expect to generate positive free-cash flow in 2017, Berry said on a conference call.

It reported second-quarter revenue of $175 million, missing its own projection of $178 million to $185 million.

Executives blamed much of the trouble on a slowdown in its services business, including its high-profile Mandiant forensics unit that helps organizations respond to cyber attacks.

That division’s revenue rose just 2 percent in the second quarter, compared to a 40 percent increase in the first quarter. Its total number of engagements rose, but average revenue from each one fell dramatically because work performed was less extensive.

Mandia said that was due to a shift away from previous years where there were large numbers of state-sponsored espionage hackers from China attacking customers in the United States.

FireEye and other cyber security firms said in June that cyber espionage attacks from China appeared to have dropped this year as the Chinese government made good on a pledge with the United States to stop supporting the digital theft of U.S. trade secrets.

The company reported lower-than-expected billings, a closely watched indicator of future business.

FireEye posted second-quarter billings of 196.4 million, below its forecast of $200 million to $215 million.

It also cut its full-year billings forecast to a range of $835 million to $855 million, from its previous range of $975 million to $1.055 billion.

In contrast, peer Symantec Corp reported second-quarter revenue and adjusted profit above the average analyst estimates, helped by strong enterprise demand for its security products.

Up to Thursday’s close, FireEye shares had fallen more than 62 percent in the last 12 months.

(Reporting by Alan John Koshy in Bengaluru; Editing by Bill Rigby)

However, Symantec Corp reported better-than-expected revenue for the first quarter and its revenue forecast for the current quarter also topped analysts’ estimates, helped by strong demand for its security products from enterprise clients.

Shares of the company, best known for its Norton antivirus software, rose nearly 5 percent in after hours trading on Thursday.

While Symantec, whose security software comes bundled with computers, has been hurt by slowing PC sales, it has been has been focusing on enterprise security and to that end bought privately held Blue Coat in June.

“The high-end of enterprise … they have a huge cloud migration going on and we are doing extremely well in that space,” Chief Executive Greg Clark told Reuters in an interview.

“We feel really strong, of course, about the high-end enterprise and are also optimistic about the execution in the mid-level and small enterprise business.”

The company’s net income rose to $135 million, or 22 cents per share, in the first quarter ended July 1, from $117 million, or 17 cents per share, a year earlier.

Excluding items, its earnings of 29 cents per share beat analysts average estimate of 26 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 3 percent to $884 million, but beat analysts’ estimates of $877 million. Revenue from its enterprise division dipped 0.2 percent to $481 million.

The company said it expects adjusted revenue of $960 million to $990 million for the second quarter. Analysts on average were expecting $878.2 million.

(Reporting by Rishika Sadam in Bengaluru; Editing by Don Sebastian and Savio D’Souza)

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