FireEye Is Not Worth Your MoneyFEYE) have performed terribly over the past few quarters. Considering the prior five quarters, it looks like FireEye has been losing its grip on the cybersecurity market as the company sales and billings growth have decreased considerably from 56 percent and 57 percent in Q2 2015 to 19 percent and 10 percent in Q1 2016, respectively.
FireEye detailed that the shift to its new cloud-based platform, FaaS (FireEye as a Service), from its on-site appliances is the primary reason behind these abrupt declines.
The company is focused on shifting customers towards its own cloud-based services, but that transaction is pondering down its top-line growth, because it usually takes a long time to recognize the revenue generated from subscriptions compared to sales of single appliances.
On the other hand, FireEye is running out of cash with each passing quarter as the company reported that it has just $184 million in cash equivalents in the end of the last quarter, compared to $402 million at the end of 2015.
This clearly specifies that the company could launch new secondary or convertible debt proposing in the near future.
Image by TBIT / Pixabay
At present stage, FireEye’s nemesis is Palo Alto Networks as the latter has taken market share from FireEye in the past. Moreover, Palo Alto’s WildFire has shown huge signs of growth and proved to be a tough competitor for FireEye.
As a matter of fact, both FireEye as well as Palo Alto have presented a surfeit of new security services in the past few years, setting their businesses into highly competitive industry. In the most recent quarter, Palo Alto reported that it had over 10,000 WildFire subscribers, a surge of more than approximately 1,000 subscribers compared to that in the previous quarter.
Apart from intense competition, FireEye’s business is also not as diverse, and its prospects have deteriorated recently, with top-line growth heading downward at a rapid rate.
Going forward, investors should expect FireEye to continue heading lower. With the company burning cash at a rapid rate, I am sure it will have to raise cash soon by diluting equity. Also, the slowdown in revenue growth also means FireEye is not a great acquisition candidate anymore and speculative investors should stay away from the stock.
Published on Sep 14, 2016By Prudent Investor