FireEye CEO: I’m Thinking About How We Execute, Not How To Exit

FireEye CEO Kevin Mandia tells investors he’s focused on building the best security company possible, and isn’t distracted by rumors about the possible acquisition of all or part of FireEye.


FireEye CEO Kevin Mandia said he’s laser-focused on building the best possible security company despite media reports that all or part of FireEye might be acquired.

“As a matter of personal habit, I don't get distracted by rumors,” Mandia told investors during the company’s earnings call Tuesday. “So I generally show up every day not thinking about 'How do we exit?' I show up every day thinking about 'How do we execute?'”

The latest round of acquisition rumors began earlier this month, when Business Insider reported that FireEye had hired Goldman Sachs to advise the publicly-traded cybersecurity vendor on a potential sale. Private equity firms were believed to be the most likely buyer of Milpitas, Calif.-based FireEye after the company failed to attract the interest of strategic buyers in an earlier process, Business Insider reported.

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[Related: FireEye Mulls Sale To Private Equity Firm, Hires Goldman Sachs: Report]

Then on Tuesday, DealReporter sources said that FireEye was struggling to find buyers for the entire company, although such a deal could still materialize. FireEye is also holding talks to potentially sell its products business, DealReporter said which accounts for over half of its yearly revenue.

Mandia told investors Tuesday that, as a matter of policy, FireEye doesn’t comment on rumors.

“I'm building this company to be the best security company it can be,” Mandia said.

FireEye in July announced a restructuring that would consolidate and streamline its product management, engineering, and customer success teams for the company's network security, endpoint security, email security and SIEM (security information and event management) product under then-CTO Grady Summers.

The reorganization also brought FireEye’s vendor-agnostic Mandiant professional services, threat intelligence, managed defense, and Helix and Verodin platforms together into a single organization.

Since then, FireEye has taken immediate steps to realign its products organization for more speed and accountability, according to Summers, who’s now executive vice president of products and customer success. Specifically, Summers said the team made moves to improve its cost structure, refocus its customer retention efforts, and accelerate new product introductions.

The reorganization and reallocation of resources helped FireEye reduce costs by about $20 million annually, though the company has reinvested some of those dollars into the cloud and platform area, according to Frank Verdecanna, executive vice president, CFO and chief accounting officer.

“While such processes are never easy, the team responded effectively,” Summers told investors Tuesday. “I believe we're getting faster at the same time as we're getting leaner, and we’re more strongly aligned that ever."

Verdecanna expects both FireEye’s general and administrative unit as well as its research and development team to be relatively flat from a headcount perspective. Spending on each is expected to increase slightly due to inflationary pressures, according to Verdecanna.

FireEye's sales for the quarter ended Sept. 30 climbed to $225.9 million, up 6.7 percent from $211.7 million the year prior. That beat Seeking Alpha's estimate of $220.1 million.

The company recorded a net loss of $65.5 million, or $0.31 per diluted share, which is 30.9 percent worse than a net loss of $50 million, or $0.26 per diluted share, last year. On a non-GAAP basis, net income plummeted to $4.3 million, or $0.02 per diluted share, down 63.6 percent from net income of $11.9 million, or $0.06 per diluted share, the year prior. That edged out Seeking Alpha’s non-GAAP net income projection of $0.01 per share.

FireEye's stock dropped $0.53 (3.42 percent) to $14.95 in after-hours trading. Earnings were announced after the market closed Tuesday.

Product, subscription, and support revenue for the quarter inched ahead to $179.8 million, up 2.4 percent from $175.7 million last year. And professional services revenue climbed to $46.1 million, up 28 percent from $36 million the year before.

For the coming quarter, FireEye expects to record non-GAAP diluted net income of $0.03 to $0.05 per share on sales of between $224 million and $228 million. Seeking Alpha had been projecting non-GAAP net income of $0.04 per share on revenue of $224.2 million.