McAfee Testing the Stock Markets Again

Earlier this week McAfee (Nasdaq: MCFE) reported its third quarter results that continued to surpass all market expectations. The recent cyber breach has been a boon to cyber security players. McAfee is also cashing in on the surge.

McAfee’s Financials

Revenues for the quarter grew 10% to $728 million, ahead of the market’s forecast by 0.7%. It was a breakeven quarter for McAfee compared with a loss of $0.02 per share a year ago. The market was looking for an EPS of $0.36.

By segment, revenues from the Consumer segment grew 23% to $395 million and Enterprise revenues were $333 million. Core Enterprise customers accounted for more than 80% of total Enterprise revenues.

For the current quarter, McAfee forecast revenues of $731-$742 million. The market was looking for revenues of $728 million for the quarter with an EPS of $0.31.

McAfee’s Expanding Partnerships

Recently, McAfee announced an extended five-year global agreement with ASUS. As part of the agreement, McAfee has become the provider of consumer security on ASUS PCs. All ASUS PCs now come pre-installed with a comprehensive security service, an optimized user experience, security tips, and recommendations on how to stay protected from new threats.

It also announced AWS integrations with its MVISION CNAPP service. The integration will help customers easily secure their applications and data in IaaS and PaaS environments. MVISION CNAPP assists customers by continuously identifying and fixing misconfigurations and software vulnerabilities in the AWS environment as well as securely accelerating the deployment of their cloud-native applications. MVISSION CNAPP provides security teams insight into service configurations for AWS as well as industry benchmarks allowing better assessments for their data and application security risk. Its integrated workload protection tools assist in improving the security across the complete application lifecycle. It has also been integrated with AWS deployment services including AW Systems Manager and AWS PrivateLink for easy and secure deployment.

Besides partnering with AWS, McAfee also expanded its relationship with Amazon itself. It recently released an exclusive offer for Business Prime members, partnering with Business Prime to solve cyber security and IT resource challenges for small businesses. The move will help it expand its presence within the SMB segment.

McAfee has an interesting history over the last more than three decades. McAfee was founded in 1987 as a firewall software provider by John McAfee. Since then the security firm expanded into other areas, and soon became known as a major anti-virus software maker. In 2010, Intel bought out McAfee in a deal valued at $7.7 billion. In 2014, it was renamed to Intel Security. But in 2016, Intel started to spin McAfee back out. As part of separating the Intel Security unit from the parent company, Intel sold 51% of its stake in McAfee to asset management firm TPG at a valuation of $4.2 billion. Last October, after staying private for nearly 9 years, McAfee listed on the stock market again when it raised $740 million at a valuation of $8.6 billion.

The cyber security space is a crowded space and McAfee competes with more established rivals such as Norton Lifelock, Trend Micro, Broadcom-owned Symantec, and Palo Alto Networks. Last year, McAfee was ranked as a leader in the Gartner Magic Quadrant for Cloud Access Security Brokers (CASB). Gartner acknowledged McAfee’s wide array of policies that are able to take full advantage of API inspection, forward-proxy redirection, reverse-proxy insertion, and RBI. Its well-supported framework, auditing, and compliance scanning coupled with the quality of interface for incident investigation and response also earned kudos from the research group.

Its stock is currently trading at $18.30 with a market capitalization of $8.3 billion. It had climbed to a high of $19.78 earlier this month. It had fallen to a low of $14.80 in November last year. The stock is still trading below its list price of $20.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

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