Late on Friday, Security software company FireEye filed the necessary papers for an IPO. The proposed ticker is FEYE (the exchange has not been selected yet) and the lead underwriters include Morgan Stanley (MS), Goldman Sachs (GS), JPMorgan (JPM) and Barclays (BCS).
FireEye was founded by mastermind Ashar Aziz back in 2004. Before that, he created Terraspring, which he sold to Sun Microsystems.
His experience in the security field helped him see a big issue in the space: Signature-based systems will eventually be ineffective. One big reason is that the emergence of new technologies like social networking, the cloud, virtualization and smartphones will allow many new entry points for malware and viruses.
At the same time, the perpetrators are no longer just solo hackers — they are often criminal organizations and even nation states!
According to FireEye’s S-1:
“[The] highly sophisticated cyber attacks routinely circumvent traditional signature-based defenses by launching dynamic, stealthy and targeted malware that penetrates defenses in multiple stages and through multiple entry points of an IT network.”
It’s scary stuff. But FireEye has built a virtual machine-based security system to fight back. It operates in real-time and uses next-generation technologies and advanced heuristic algorithms. For the most part, FireEye detects a threat in the early stages and takes care of it with little disruption to a company’s network. In fact, the software can be deployed within only a few hours.
As should be no surprise, FireEye has has snapped up many customers, which now total over 1,000. They span across more than 40 countries and include over 125 of the Fortune 500.
From 2010 to 2012, revenues surged from $11.8 million to $83.3 million. During that time, though, the losses climbed from $9.5 million to $35.8 million. But keep in mind that FireEye has invested heavily in building a strong foundation for continued hyper-growth.
The company also has a top-notch management team. In November 2012, it hired David DeWalt as CEO. Keep in mind that, in 2007, he led a turnaround of McAfee and then sold the company to Intel (INTC) in 2011 for $7.7 billion. Before this, he served as an executive at EMC (EMC) and Documentum.
And yes, the timing looks spot-on for a FireEye IPO. Just a few weeks ago, Cisco (CSCO) agreed to shell out over $2 billion for security operator Sourcefire (FIRE). As a result, the deal has sparked buzz that other mega tech companies, like Oracle (ORCL), Microsoft (MSFT) and IBM (IBM), will ramp-up their M&A as well.
What’s more, security IPOs have also performed well. One of the standouts is Imperva (IMPV), which is up almost 200% since its offering in late 2011.
In light of all this, it’s a pretty good bet that Fireye will light up investors’ wallets.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.