Can FireEye CEO Dave DeWalt pull off a three-peat? The network security firm went public on Friday at $20 a share and instantly shot as high as $43 before settling in the $37-a-share range.
DeWalt's star began ascending when, as CEO of Documentum, he strung together 13 consecutive quarters of record revenue, enough to sell the content-management software firm to storage giant EMC in 2003 for $1.7 billion, a 29% share-price premium.
For his second act, DeWalt revved up sales at McAfee, priming the antivirus giant for sale to Intel in 2010 for $7.68 billion, a 60% share-price premium.
Can you blame growth-starved investors for betting DeWalt will next knock FireEye out of the park? "Dave DeWalt is the Teflon guy with the golden touch," says Daniel Ives, managing director at FBR Capital Markets. "If you've invested well in the companies he's been at, you're probably living on your own island right now."
The University of Delaware Hall of Fame champion collegiate wrestler deflects any personal credit. He says the team assembled by FireEye founder and CTO Ashar Aziz has toiled long and hard to introduce key innovations.
"You can be the world's greatest quarterback, but if you don't have a team, you can't be successful," DeWalt says. "This is about a global pandemic that needs some new technology to help solve."
DeWalt argues that traditional defenses, including the antivirus systems he sold as head of McAfee, just don't cut it anymore. FireEye uses virtual computing to detect malicious attacks, and shares fresh intelligence across the networks of all of its customers in near real time.
Global demand for the next generation of cyber defenses should grow steadily for the foreseeable future, says Asheem Chandna, of Greylock Partners, a leading Silicon Valley venture capital firm.
"We're seeing a broad-based resurgence in IT spending on security, largely driven by new threats and the secular moves to mobile and cloud computing," Chandna says.
But even triple-digit revenue growth may not be enough. Rivals such as firewall company Palo Alto Networks and messaging security firm Proofpoint are integrating FireEye-style intelligence gathering into multitiered systems.
"FireEye is really a one-product company," says Jon Oltsik, a senior analyst at Enterprise Strategy Group. "Security technology is full of product categories that ended up becoming features of other products. FireEye needs to move quickly, or this may become its fate."
Palo Alto Networks CEO Mark McLaughlin contends FireEye's technology "has very limited prevention capabilities," while Proofpoint CEO Gary Steele suggests DeWalt may find it hard to maintain FireEye's spending on sales and marketing. Cybersecurity firms typically spend 30% to 40% of revenue on sales and marketing. For the six months ending June 30, FireEye took in revenue of $61.6 million, but spent $66.2 million on sales and marketing.
In an attempt to define itself as a category leader FireEye has taken "an 'Internet boom' approach" that has included giving away evaluation systems to prospective customers, Oltsik says.
Joe Horowitz, managing general partner of Jafco Ventures, which has an investment stake in FireEye, chalks it up to a cost of doing business. "Any company that is addressing a huge market opportunity with a highly differentiated product has to make an investment in sales capacity," Horowitz says. "And, really, that's what this investment is all about."
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