14 DAY TRIAL // FireEye has announced plans to lay off between 300 and 400 employees as a cost-saving measure following a below-forecast sales report for the second quarter of 2016.
The US company is one of the world's biggest cyber-security vendors and currently has a staff of over 3,400 employees.
According to statements made by CEO Kevin Mandia for Reuters, the sudden drop in business is directly correlated with how the cyber-security market has evolved in the past year, pointing the finger at two issues.
State-sponsored cyber-attacks have gone down
The bulk of the company's sales comes from its top-notch Mandiant division, usually called upon to investigate serious data breaches and state-sponsored attacks.
These types of incidents require a large number of employees to investigate and clean up, but after the China-US anti-spying pact, signed last September, the number of Chinese-linked cyber-attacks has gone down, and so have FireEye's Mandiant sales.
In fact, it was FireEye itself who noted that China kept its part of the deal in a report it released at the end of June, when, most likely, its team was trying to understand what was going wrong with their sales.
Ransomware infections have gone up, but they cost less to fix
The second factor that has eaten at FireEye's bottom line is the rise of ransomware infections. While companies suffer huge reputational and financial damages after ransomware infections, FireEye isn't making a profit on their back either.
Ransomware infections are notoriously easy to fix, at least to infosec experts. They either can decrypt the ransomware or they can't, in which case they just create a backup of the encrypted data and wipe the system clean.
The large number of ransomware cleanups to which the company responded didn't hurt FireEye's business overall since the company made a profit, but did affect the overall size of the generated revenue, below a threshold promised to shareholders.
Company was $3 million below its predicted revenue
The company registered revenue of $175 million in Q2, below the $178-185 million range it set out to reach.
The impact was swift on the stock market, where FireEye lost 16.2 percent of its share price after the news came out. Year-over-year, FireEye shares are free-falling, down 62 percent.