FireEye Stock Soars On $9 Billion Cisco Buyout Rumors

Just hours before Cisco disclosed its third-quarter financial results, FireEye stock soared on rumors of a $9 billion buyout bid by the networking giant.

The rumors were reported by multiple financial market sites, including Seeking Alpha and Nasdaq, attributed only to unconfirmed Wall Street chatter about the acquisition. Despite their vague nature, the rumors drove FireEye's stock up by more than 5 percent Wednesday afternoon, closing up 5.23 percent at $43.46. FireEye's current market cap is around $6.7 billion.

Cisco reported its third-quarter financial results Wednesday after the market closed. The results have been highly anticipated, as they mark the last earnings call to be led by 20-year CEO John Chambers before Chuck Robbins, senior vice president of Worldwide Field Operations, takes the helm July 26. There was no mention of FireEye in a Cisco press release disclosing the results.

[Related: Cisco CTO: Security, Big Data Analytics Services Poised To Boom In The Channel]

Cisco and FireEye declined to comment, both saying that they don't comment on rumors or speculation.

Robbins recently said Cisco will be upping its investment in security under his watch.

"As you think about what our customers are dealing with today, the one common element across the entire infrastructure -- whether it's my private infrastructure out to the cloud, across mobile devices, coming in from coffee shops, taxis and airplanes -- the one thing that's pervasive across that entire continuum is the network. We believe [there] is a tremendous architectural opportunity for us around security, and you'll see us actually invest [an] even greater [amount there]," Robbins said during a press conference last week.

The rumors come as Cisco looks to put an increased emphasis on its security business -- something the company's executives emphasized at the 2015 Cisco Partner Summit in Montreal two weeks ago. The company was vocal about building a security strategy focusing on end-to-end architecture instead of just point solutions.

On stage at the event, Rob Soderbery, senior vice president of enterprise products and solutions at Cisco, emphasized the company's focus on security and highlighted the billions of dollars it has spent in recent years on blockbuster acquisitions, including Sourcefire, ThreatGrid and Meraki.

"I know there's concern out there [about Cisco's commitment to its security business], but when you look at today's security business, Cisco is the market leader in security -- we have more revenue in security than anyone else. It's a big, fragmented market, though, and there's a ton of upside."

"Over the last couple of years, we've spent billions of dollars building that security portfolio, and we're going to keep investing to stay in that leadership position," Soderbery said in his keynote at the event.

Andrew Sherman, CISSP and security practice lead at New York-based Eden Technologies -- a Cisco Security partner -- said a FireEye acquisition would be a good move for Cisco, especially as the vendor looks to put more emphasis behind its security practice. Sherman said it would be interesting to see what Cisco would do with the Mandiant piece of the portfolio, which FireEye acquired in January 2014 for $1 billion, adding in-depth threat intelligence research, end-point security and incident response services.

"I can see where it makes sense," Sherman said of the possible acquisition. "Cisco is trying to get back into security, and FireEye is certainly the leader at what they do."

For its third fiscal quarter, ended April 25, Cisco reported earnings of $2.44 billion, up nearly 12 percent from the year-ago quarter. Its sales climbed more than 5 percent to $12.14 billion compared to last year.

Shares of Cisco dipped 13 cents to $29.22 in after-hours trading.

PUBLISHED MAY 13, 2015