No, seeing someone doesn't desneak them, they are still considered sneaking until you hit them, hence why they seem to disappear into thin air.
This is the ONLY problem with sneak. Revert nerfs and make it so being seen un-sneaks them, and all problems solved and everybody happy. Add a 1.5s timer for sneak (they must be unseen for 1.5s to activate) and you have well balanced sneak that is deadly but not to the level of wizards.
And since I guess the above wont happen for some reason, at least make it so when you raise gun to shoot at sneak and they disappear, it still shoots but with -40% accuracy or something. It's just plain buggy to constantly raise your gun (and often lose AP without shooting) at a sneak.
It's dumb how as a sneak you can simply run 2 hex to the side while the guy raises his gun, and disappear, then come back and kill because he wasted all his AP on buggy mechanics.