Sourcefire's (NASDAQ:FIRE) Immunet Strategy a Good One Says Needham

Liking the move of Sourcefire (NASDAQ:FIRE) away from its reliance on its core IPS product, Needham said it will probably come under fire for the dilutive aspect in the short term.

Needham says, "We like the strategic direction Sourcefire is pursuing with Immunet, as it broadens FIRE beyond its core IPS product for network security. The deal may be criticized for its near-term dilutive nature and its “free-to-premium pay” model. However, we believe FIRE is pursuing the same playbook as ArcSight (now HP), which maintained 20%+ topline growth while delivering flattish EPS, in the name of pursuing a vast network security spending opportunity. We continue to believe FIRE is an attractive M&A candidate.

"The general CY11 guidance of “at least 20%” revenue growth is in-line with consensus; however, the (0.10) dilution of the Immunet acquisition suggests $0.60 EPS in CY11, below $0.70 EPS consensus. We are maintaining our $157m, but lowering EPS to $0.60. Introducing CY12 of $191m and $0.80 EPS."

Needham & Company maintains a "Buy" rating on Sourcefire, which closed Thursday at $24.68, down $2.14, or 7.98 percent. Needham has a price target of $32 on them.