As its stock heads south, once-loved startup digs in for the long term

Its shares are starting to look like a after the bubble has popped but that isn’t stopping security firm FireEye from adding more headcount, throwing $70 million (£42 million) in cash and shares at privately-held nPulse Technologies.

nPulse’s speciality is packet-poking “full packet capture and indexing”, basically a technology to perform packet and metadata forensics of the sort used to understand the scope of data breaches, i.e. real-world attacks on data. 

Despite the high price for a startup with only 30 employees, the acquisition fits nicely with FireEye’s stable of technology built around detecting and reacting to complex multi-layered attacks rather than simply pretending they can be stopped from happening at all. FireEye CEO David DeWalt describes nPulse's technology it as being like a “flight recorder” for networks.

It follows on from the firm’s $1 billion buy of Mandiant in January, which was nabbed in part because it had enough serious-looking consultants in ties, suits and shiny shoes to look the part in the corridors of Washington DC. Not coincidentally, nPulse’s customers also include the US Department of Homeland Security.

FireEye might be a Silicon Valley startup but it wisely wants some East Coast sheen to give the story more weight.
The acquisition strategy looks sound although some think they over-paid for Mandiant. Respected independent security analyst Richard Stiennon gave the deal a thumbs up, after saying:

“I am not a fan of holistic land grab strategies for security vendors. Any strategic combination of network, host, data, access control, and professional services is not going to work.”

“FireEye is a network security vendor that went to market without a critical component for fighting modern targeted attacks: full packet capture and security analytics. The acquisition of nPulse addresses this gap and is logical for a network security vendor.”

Despite the process of maturation, FireEye has been getting it in the neck from the fickle stock market (this is why startups stay private - ed), crashing by a quarter in only one day earlier this week. All that with a share lockup expiry approaching on 21 May. The small consolation is that unproven tech stocks are suddenly last year’s fashion. FireEye is not the only firm that has had to hit the investor reset button on expectations. But further acquisitions look likely - Rome wasn't built in a day but no other city was either.