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FireEye Hammered By Changing Threat Landscape, Plans Channel Charge With New Products

FireEye CEO Kevin Mandia said the company is "broadening" its threat coverage with a new set of competitively priced cloud solutions that are well suited for channel partners.

FireEye CEO Kevin Mandia Thursday said a dramatic change in the threat environment has the company moving forward with a sales restructuring and a set of new products better suited for channel partners.

With more smaller scale ransomeware attacks and fewer large scale enterprise attacks, FireEye has significantly reduced its 2016 sales outlook and has implemented a restructuring that will result in a workforce reduction of as many as 400 employees, or 10 percent of the workforce.

[Related: FireEye Laying Off 10 Percent Of Workforce As Part Of Major Restructuring]

The shakeup includes executive changes that see FireEye searching for a new worldwide sales chief and a new sales boss for its Europe/Middle East/Asia region.

The scale and scope of attacks, which led to significantly lower-than-expected consulting sales, has gone from "hundreds of compromised machines by attackers who wanted to maintain and keep access to more of the Ransomware-type attacks and extortion attacks that are simply easier to remediate at times," said Mandia.

That change in the attack landscape resulted in the average transaction size of the $1 million-plus size deals that are a significant part of FireEye's enterprise business dropping 13 percent in the second quarter ended June 30 compared with the year ago quarter.

As a result, FireEye is lowering revenue estimates that were as high as $845 million for 2016 just six months ago to a range of $716 million to $728 million.

The revised outlook came after FireEye posted a $139.32 million loss on sales of $175 million compared with a loss of $133.57 million on sales of $147.2 million in the year ago quarter.

The loss and the restructuring sent FireEye shares plummeting $2.81 or 17 percent to $13.94 in after-hours trading.

Mandia said the company is fighting back with plans to release a new on-premise private cloud MVX appliance that is set to be released later this month and an MVX detection-in-the-cloud offering that is targeted at "smaller, price-sensitive customers" on track for general availability in the fourth quarter.

"We believe that these solutions will open new markets as we have greater price flexibility and multiple deployment options," said Mandia.

FireEye also plans to extend its HX endpoint product with a new release in the first half of 2017 that will be aimed at "replacing traditional [antivirus] solutions," said Mandia.

The new product offerings are locked and loaded for FireEye solution providers to play a bigger role in driving sales growth in the future, said Mandia.


In fact, Mandia was "very bullish" on the channel's ability to drive sales growth with more competitively priced product offerings coming down the road.

"We believe that by broadening our threat coverage and offering competitively priced cloud-based solutions that our products become better suited to distribution through our reseller channel," said Mandia. "Our channel partners can play an important role in introducing our new solutions and expanding our customer base."

Approximately 70 percent of FireEye's annual sales are partner-led, and the company is looking at increasing that figure going forward.

Mandia said it is critical that FireEye do the appropriate sales training for the channel so they are primed to bring the new offerings to market. Putting the MVX on premise teamed with a subscription-based cloud offering changes the game, he said. "It is price sensitivity and that ease of deployment," he said. "I am very bullish on that helping us in the channel."

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 167 on the CRN 2016 Solution Provider 500, applauded the new FireEye channel offensive.

"You have to be flexible and engaged in the channel especially with the channel so embedded in these organizations that are being threatened," he said. "You need the channel to grow and scale. FireEye is obviously seeing that."

Mandia conceded that the new products and executive changes will not be enough for the company to achieve profitability and balanced growth. "We must simplify our business and operate more efficiently," he said. "I believe the restructuring and workforce reduction we announced today is absolutely necessary to balance growth and profitability."

FireEye said it is aligning the company's expense structure with current growth expectations with a plan to achieve Non-GAAP profitability in the fourth quarter of 2017.

Furthermore, FireEye said it expects to recognize pretax charges of $15 million to $20 million in the third fiscal quarter related to severance and one-time costs associated with the cutbacks.

With charges included, FireEye reported a Non-GAAP net loss per share of 33 cents compared with a Non-GAAP loss per share of 41 cents in the year ago quarter.

The Non-GAAP net loss of 33 cents per share was better than the Thomson Reuters Wall Street consensus of a net loss of 39 cents per share. But the $175 million sales for the quarter was down four percent compared to the Thomson Reuters Wall Street consensus of $181.7 million.

CFO Mike Berry, for his part, said FireEye has traditionally had great success with" large enterprise" customers and is now expanding its threat coverage to appeal to a "broader range" of customers that will drive customer acquisition and top line sales growth.

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