Dive Brief:

• Mandiant's CEO Keven Mandia declined to comment Tuesday on a Bloomberg story, citing unnamed sources, that said Microsoft was in talks to acquire the company. Mandiant's stock spiked as much as 18% on the report.
• Mandiant, a leader in cyber defense and response, clocked fourth-quarter profit of $1.1 million, climbing back from a loss of $44.3 million in the year-ago period. That's $4.65 a share versus a loss of 19 cents. 
• Revenue grew almost 21% to $133 million, and the company ended the quarter with $410 million in deferred revenues. Billings, a success metric for Mandiant and how it calculated sales compensation, grew 54% year over year to $229 million. That figure was buoyed by 83% growth in platform, cloud subscription and $136 million in managed services billing. 

Dive Insight:

As executives dodged questions about a potential takeover, they focused on the big event in Mandiant's fourth quarter: the October sale of FireEye Products to McAfee Enterprise, which is backed by a consortium led by Symphony Technology Group.

The deal allows Mandiant to laser in on threat intelligence and consulting, critical in a security environment of constant reaction. By divesting FireEye's network, email, endpoint and cloud security products, Mandiant's core technology is the multivendor XDR platform Mandiant Advantage. 

"In the fourth quarter, we had record billings, record revenue and the highest-ending [annual recurring revenue] for threat intelligence, '' Mandia said during the quarterly earnings call with analysts. "This success is rooted in our investment in a global research network." 

Mandiant's intelligence research function is already fully scaled, providing a "competitive moat," Mandia said. The company also has a roster of employees monitoring ransomware and other threat actors to understand techniques and targeting. Mandiant used that data last year to notify 2,300 organizations of successful or imminent attacks, though they were not customers at the time. 

The company has used its SaaS to leverage partnerships with other leading security providers, including an existing integration with Microsoft and a new partnership with SentinelOne, a deal announced Tuesday.

Mandiant's more streamlined business makes it a ripe acquisition target.

But the company is playing catchup after years locked into the FireEye technology ecosystem, said Jeff Pollard, VP and principal analyst at Forrester. "Expanding its stable of intellectual property, marketing and sales efforts for the 'new Mandiant,' and scaling services on a global basis are expensive endeavors." 

Microsoft has the scale and a robust security business, with revenue in the segment surpassing $15 billion over the past 12 months, up 45% year over year, CEO Satya Nadella said during a January earnings call. 

Microsoft is also under pressure to serve as a technology provider and network defender, as threat actors dog its platform. This risks were laid bare with the attacks on SolarWinds and Microsoft Exchange. 

With a market cap already exceeding $2 trillion, Microsoft is still growing its portfolio, and last month announced a $68.7 billion all-cash deal to acquire entertainment company Activision Blizzard. 

If Microsoft acquires Mandiant, it will reap the benefits of a cybersecurity brand with enormous prestige and fill gaps in its portfolio, Pollard said. "Cybersecurity is a key part of Microsoft's overall enterprise strategy, and snagging Mandiant shortly after the company ended its long marriage with FireEye would serve as more evidence."

Mandiant's services segment in particular raises questions about scale. Mandia said, "We're not a services company. We don't wake up every day and go, let's maximize services."

For the fourth quarter, Mandia reported revenue of $66 million, up 22% year over year, with $139 million in deferred revenue.

Mandiant, which will hold a virtual conference for analysts and investors on March 10, now forecasts first-quarter revenue of between $128 million and $131 million, and full-year revenue of between $555 million and $565 million.

During the fourth quarter, Mandiant repurchased an additional $200 million in stock and has the same amount of money left to spend to complete the board-approved $500 million repurchase program.

For the full year, Mandiant earned $900 million, up from a loss of $213 million in 2020. Revenue totaled $483 million, a 21% increase.