FireEye Inc. is looking at a turbulent quarter as it spins off its legacy products business to focus on cloud-based services, which will result in higher costs.

FireEye
FEYE,
-1.76%

reported results Thursday that were in-line with Wall Street estimates, but an outlook that shows a rough road as the company transforms. Shares fell 8% in after-hours trading immediately following the release of the results, after closing the regular session with a 1.8% decline at $20.09.

FireEye announced in June that it would spin off its legacy products from its Mandiant Solutions business for $1.2 billion. Mandia said in February that cloud-based services and intelligence consulting made up two-thirds of FireEye’s current business, making 2020 the first full year that cloud-based products have surpassed on-premise legacy products.

One of the biggest advantages from the spinoff will be the remaining company’s “ability to do technical partnerships that are meaningful and overlay our expertise and intelligence a validation with those,” FireEye Chief Executive Kevin Mandia told MarketWatch in an interview. “We become far more relevant at what we’re good at.”

Using combined results, FireEye reported a second-quarter loss of $49.5 million, or 29 cents a share, compared with a loss of $53.3 million, or 24 cents a share, in the year-ago period. Adjusted earnings, which excludes expenses for stock-based compensation and other items, were 9 cents a share, flat from the year-ago quarter.

Revenue rose to $248 million from $229.9 million in the year-ago quarter.

Analysts surveyed by FactSet had forecast adjusted earnings of 9 cents a share on revenue of $248.9 million.

Using the pre-spinoff numbers, FireEye expects third-quarter adjusted earnings of 5 cents to 7 cents a share, while analysts had forecast earnings of 11 cents a share.

FireEye Chief Financial Officer Frank Verdecanna told MarketWatch that the costs associated with the transformation are what’s hurting results in the third quarter, and that those will be short term.

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