FireEye Misses Revenue Estimates In Q4 But CEO Says New Channel Focus Will Drive Sales Growth

FireEye's CEO said partners are excited about the company's upcoming channel opportunities in 2017. The backdrop of that optimism, though, was an earnings call when the company's fourth-quarter revenue estimates fell short of analyst expectations and announced executive departures pushed its stock price down after hours.

FireEye has pushed a renewed commitment to the channel over the past few months, a commitment that CEO Kevin Mandia reiterated on the company's fourth-quarter earnings call Thursday. That includes new enablement, demand generation, rules of engagement, pricing structures, and products geared to grow channel business and regain partner trust.

"We have heard from our partners – they are excited about the changes that have made and the expanded opportunity they have to work with FireEye," Mandia said.

[Related: FireEye's Executive Chairman And Former CEO, Dave DeWalt, Has Resigned]

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Mandia gave examples of changes FireEye has made. He noted new rules of engagement to move virtually all FireEye sales through the channel and minimizing non-standard pricing deals. He also said pricing for new appliances and Cloud MVX would be aligned with midmarket customer and partner needs, and he touted upcoming new campaigns to drive demand for network, email, endpoint, orchestration and the Helix platform.

The comments come as FireEye missed revenue estimates for the fourth quarter, reporting sales of $184.7 million and billings of $221.8 million, the latter down 14 percent year over year. Analysts were expecting FireEye to report revenues of $191 million and a net loss of 16 cents a share. The company's reported net loss beat expectations - it reported a net loss for the quarter of $61.5 million, or 3 cents a share.

For the full fiscal 2016, FireEye reported sales of $714.1 million, up 15 percent year over year, and billings of $819.5 million, up 3 percent year over year. Net loss for the full fiscal year was $480.1 million, compared to a net loss of $539.2 million in 2015.

FireEye shares fell $2.26 (-17.42%) to $10.71 in after-hours trading on Thursday.

CFO Mike Berry said several major transitions are happening at FireEye that are affecting the company's earnings. He said several large deals failed to close at the end of the quarter, but he said he didn't think that was tied to any specific product patterns.

Berry said FireEye is also undergoing a transformation to more recurring subscription services sales as a larger portion of the company's revenue comes from products from or in the cloud. More than a third of total revenue came from such solutions in the fourth quarter, up 60 percent year over year, he said.

Mandia also highlighted changes in the company's sales leadership and teams that affected the company's sales in the quarter. He said FireEye was without a head of worldwide sales and sales lead in Europe for most of the second half of the year, as well as lost "a bunch" of sales representatives in the fourth quarter. FireEye has since filled these positions, appointing former Symantec executive Bill Robbins as head of worldwide sales and Kevin Taylor to lead the company’s EMEA sales.

Alongside its earnings, FireEye also announced the departure of Executive Chairman and former CEO Dave DeWalt, who resigned Jan. 29, and the departure of CFO Berry. Berry will be replaced by Frank Verdecanna, senior vice president of finance and chief accounting officer. FireEye also announced former iSight CEO John Watters as executive vice president of a new Global Services and Intelligence division, which includes Mandiant, iSight and FireEye-as-a-Service.

"We are undergoing many changes at FireEye but I am confident in our future," Mandia said.

Mandia said the priorities going forward into fiscal 2017 would continue to be rightsizing the company's cost structure to achieve profitability this year and evolving the product portfolio to meet new technology trends. He said FireEye would also continue its commitment to the channel in 2017.

Berry said FireEye was deferring on providing guidance for the full year 2017 until the company's upcoming analyst day. However, he said to expect the company to generate positive cash flow for the full year, show improving top and bottom line performances as the year progresses, and see new products such as Helix, Cloud MVX and HX to "contribute meaningfully to billings," and operating expenses to remain in line with Q4 2016.

For the first quarter 2017, FireEye said revenues would be between $160 million and $166 million, and billings would be between $130 million and $150 million. The company expects a loss per share to be between 26 and 28 cents a share.