NEW YORK (Real Money) -- What opportunities are so great that you have to be willing to lose money to grab them all? What kind of business willingly loses money in order to capture all the business out there?
I can think of only one: cyber security. When I had FireEye's (FEYE) irrepressible CEO Dave DeWalt on Mad Money last week, at one point I showed him a chart in his own deck which depicted pretty much steady losses for quite a bit, certainly more than most companies. We would not typically tolerate this rate of loss unless the company were a biotech spending heavily to get a new, blockbuster drug to through the FDA to the market.
But DeWalt responded two ways. First, he asked me to examine the cash flow which, while still negative, had managed to get better over the last couple of quarters.
Second, though, he said that he needed to spend more to meet the demand, the demand that comes from the almost daily hacks, like the one for that big Blue Cross Blue Shield outfit, CareFirst just experienced where FireEye was called in to find out what the heck was going on. Like the Sony (SNE), Home Depot (HD) and Target (TGT) hacks, where only FireEye seems to have the forensic technology to get to the bottom of the hack quickly.
Plus, the company isn't just in the forensics business. It's in the threat prevention game, too, and in order to be a dominant player in that end, you have to spend a ton of money and get the right, trustworthy people working for the company. These people are expensive and they don't grow on trees.