Cybersecurity Firm McAfee Files For Second IPO

McAfee’s move paves the way for its return to the stock market, having traded publicly from 1999 to 2011 prior to being acquired by Intel. Its IPO filing detailed the “significant portion” of sales that go through the channel.

McAfee is headed back to Wall Street as the company Monday filed for an intial public offering, highlighting the channel for driving a “significant portion” of its sales.

San Jose, Calif.-based McAfee listed a placeholder valuation of $100 million in its IPO filing with the U.S. Securities and Exchange Commission, though the actual number is expected to be higher.

The company’s filing detailed the importance of the channel to its revenue stream.

“We rely significantly on third-party partners to facilitate the sale of our products and solutions. We sell a significant portion of our solutions through third-party intermediaries such as affiliates, retailers, ecommerce, PC OEMs, and other distribution channel partners,” the company said in the filing.

The filing also spotlighted the role distributors Ingram Micro, Arrow Electronics and Tech Data—which it called “three of our largest channel partners”—play bringing in sales. The company said the three distributors contributed nearly a quarter of its net revenue—15 percent, 3 percent and 5 percent respectively—for the 26-week period ended June 27.

Looking at the previous two years, Ingram Micro’s contribution to McAfee’s net revenue held steady at 15 percent in fiscal 2018 and 2019 as well, while the other two distributors’ share of net revenue contribution has dropped. Arrow Electronics accounted for 9 percent in fiscal 2018 and fell to 7 percent in fiscal 2019. Tech Data accounted for 8 percent in fiscal 2018 and fell to 6 percent in fiscal 2019.

Ahead of the filing, the company has been taking steps to bolster its sales leadership ranks, hiring Lynne Doherty, the former head of Cisco’s U.S. commercial sales organization, as its executive vice president of global sales and marketing in May. Doherty’s direct reports include global channel chief Kathleen Curry, a former Apple sales executive who joined McAfee in April as its senior vice president of global enterprise channels, OEM and strategic alliances.

McAfee is just the second cybersecurity company to announce an IPO in 2020. Sumo Logic filed for an IPO last month and began trading this month. In contrast, there were four cybersecurity IPOs last year: Cloudflare, CrowdStrike, Ping Identity and Tufin.

In fact, endpoint security companies have largely been exiting the public markets since CrowdStrike’s massive IPO in June 2019.

Publicly traded Carbon Black was sold to VMware for $2.1 billion in October 2019; publicly traded Symantec was sold to Broadcom for $10.7 billion in November 2019; and publicly traded Sophos was sold to Thoma Bravo for $3.9 billion in March 2020. McAfee is the first endpoint security company to enter the public markets since CrowdStrike.

CrowdStrike is now worth more than $30 billion and is rapidly consolidating market share in the endpoint security space.

McAfee’s push to become public comes as two other technology firms are set to begin publicly trading this week in their own IPOs: big data player Palantir Technologies and project management tool maker Asana.

McAfee has not determined the number of shares to be offered or the price range for the proposed offering. It has applied to list its Class A common stock on Nasdaq under the ticker symbol “MCFE.”

McAfee, founded by John McAfee in 1987 and currently run by CEO Peter Leav since February, has made $1.4 billion in revenue through June of this year compared to $1.2 billion in the same six months a year ago.

The company said its IT security portfolio is well-positioned in the market as corporations of all sizes seek to defend against ransomware syndicates.

“We have seen the number of threats from external actors targeting cloud services increase approximately 630 percent from January 2020 to April 2020,” the company said in its filing. “Enterprises have to protect themselves from increasing ransomware attacks, which has generated billions of dollars in payments to cybercriminals and inflicted significant damage and expenses for consumers, businesses and governments.”

McAfee bought TunnelBear, a consumer VPN, in 2018, and Skyhigh, a leader in cloud access security broker, in 2017 to reinforce its offerings.

McAfee’s customer list includes 86 percent of the Fortune 100, 78 percent of the Fortune 500 and over 61 percent of the Global 2000, as of June 27, 2020, the company wrote in its filing.

“Our largest customers are typically our longest tenured customers and purchase the most number of products from our portfolio to meet their business needs,” the filing states.

McAfee was publicly traded from 1999 until it was bought by Intel in 2011. After sinking $7.6 billion into the acquisition, Intel had hoped to integrate security into the company’s chips. Six years later, Intel lost interest in running the cybersecurity company and struck a deal to sell a controlling stake in April 2017. TPG Global, LLC and the private equity firm Thoma Bravo bought 51 percent of the company from the chip maker in the deal.

Morgan Stanley and Goldman Sachs & Co. LLC are acting as lead book-running managers and representatives of the underwriters for the offering. TPG Capital BD, LLC, BofA Securities, Citigroup, RBC Capital Markets, Deutsche Bank Securities, UBS Investment Bank, HSBC and Mizuho Securities will also serve as joint-bookrunning managers for the proposed offering. Evercore ISI, Piper Sandler and Stifel are acting as co-managers for the offering.

Michael Novinson contributed to this report