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FireEye Slides on $1.2 Billion Sale of Products Business

FireEye says the transaction will separate FireEye's network, email and cloud security products from its cyberforensics unit, Mandiant Solutions.

FireEye  (FEYE) - Get FireEye, Inc. Report stock was lower Thursday after the cybersecurity company said it agreed to sell its products business, including the FireEye name, for $1.2 billion in cash to a group led by Symphony Technology Group.

Separately, FireEye said the board had authorized management to buy back as much as $500 million of stock.

Shares of the Milpitas, Calif., company at last check were off 12% to $19.83.

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The transaction would separate FireEye's network, email and cloud security products from its cyberforensics unit, Mandiant Solutions.

The company had acquired Mandiant for about $1 billion in early 2014. Mandiant was founded by Kevin Mandia, who became FireEye's chief executive.

Mandiant will return as an independent company, focused on cyberincident response and cybersecurity testing, and will be publicly traded following the transaction.

"[This] separation will unlock our high-growth Mandiant Solutions business and allow both organizations to better serve customers,"  Mandia said in a statement.

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The deal is expected to close by the end of the fourth quarter, subject to conditions including regulatory clearances.

Morgan Stanley analyst Hamza Fodderwala said the sale of what he called the "stagnant" products business makes sense as it enables the company to focus on a higher-growth franchise in Mandiant, according to the Fly.

But including about $1.1 billion of after-tax cash proceeds from the pending sale, Fodderwala estimated a sum-of-the-parts value modestly above $20 a share, or slightly below current trading levels. That made the upside for the stock following the deal "less clear," he said. 

Fodderwala affirmed an equal-weight rating and $19 price target on the company.

Baird analyst Jonathan Ruykhaver said he had long believed that FireEye could unlock value by splitting off the legacy business. But the company is divesting more than he expected. 

The analyst said he saw it as a step in the right direction. But he said the transaction meaningfully reduces near-term visibility into the financial models and adds execution risk. Ruykhaver maintained his outperform rating and $24 price target.

Last month, FireEye said its Mandiant incident response division was assisting with the investigation into a ransomware attack that shut down operations of the biggest gasoline pipeline in the U.S.

In March, cybersecurity firm McAfee  (MCFE) - Get McAfee Corp. Report agreed to sell its enterprise business to Symphony Technology Group for $4 billion cash. Symphony is the Palo Alto, Calif., private-equity firm.

Last year, Dell Technologies  (DELL) - Get Dell Technologies Inc. Class C Report agreed to sell its RSA cybersecurity unit for $2.08 billion to a group led by Symphony Technology, Ontario Teachers' Pension Plan Board and PE firm Carlyle Group's  (CG) - Get Carlyle Group Inc (The) - Ordinary Shares Report AlpInvest Partners.