Shares in Mandiant Inc. surged today after a report that Microsoft Corp. is in talks to acquire the company, as the cybersecurity company Mandiant reported stronger-than-expected earnings.

Bloomberg, referencing people familiar with the matter, reported that the private talks may not result in an offer but would bolster Microsoft’s efforts to protect customers from hacks and breaches. Both companies have declined to comment on the report.

“This would be a smart move for Microsoft,” Bloomberg Intelligence’s Anurag Rana said. “In the future, the cloud with most security features would win.” The addition of Mandiant would allow Microsoft to compete better both in the security business and within the cloud market against Google LLC and Amazon Web Services Inc.

Mandiant was acquired by FireEye Inc. in 2014 in a deal valued at approximately $1 billion in stock and cash. FireEye’s product group and its name were subsequently acquired by Symphony Technology Group for $1.2 billion in June. The company retained the Mandiant business, renaming itself after the acquired company when the deal was completed in October.

Microsoft would be acquiring a growing company if a deal occurs, as shown in Mandiant’s latest quarterly earnings report.

For the quarter ended Dec. 31, Mandiant reported a loss before certain costs such as stock compensation of 10 cents per share on revenue of $133 million, the latter up 21% from the fourth quarter of 2020. Analysts had been expecting a loss of 13 cents per share on revenue of $131.5 million.

Annualized recurring revenue came in a $279 million, up 23% year-over-year, with deferred revenue up 44% to $410 million, both an indication of future business.

For the full year 2021, Mandiant reported an adjusted loss per share of 51 cents, down from 57 cents for 2020. Revenue in the year rose 21%, to $493 million.

“We achieved a significant milestone in Q4, divesting the FireEye Products business and positioning Mandiant to deliver accelerating growth and extend our leadership position in expertise and intelligence,” Mandiant Chief Executive Officer Kevin Mandia said in a statement. “We are uniquely positioned to address an enormous market need and can concentrate all of our attention on helping organizations close their cyber security gap.”

Looking forward, Mandiant said that it expected an adjusted loss of 13 to 15 cents per share in the first quarter on revenue of $128 million to $131 million. For the full year 2022, Mandiant predicts a loss of 36 to 38 cents per share on revenue of $555 million to $565 million.

Investors liked both the report that Microsoft was in talks to acquire Mandiant as well as the earnings report. Mandiant shares rose almost 18% in regular trading, to $17.75. After the bell and with the release of the company’s earnings report, Mandiant shares rose 4% more.

Image: Microsoft Sweden/Flickr