News Column

FireEye Shares Were Still on Fire Post IPO

September 21, 2013

By Peter Delevett and Jeremy C. Owens, San Jose Mercury News

San Jose Mercury News (CA) (Published: 20-Sep 2013 11:15 AM, Received: 11:15:01 AM)
MILPITAS -- FireEye's initial public offering grew in size at a dramatic rate in the past week, but Wall Street wasn't done increasing the price for a piece of the Silicon Valley security software firm.

After pricing shares more than 40 percent higher than its original maximum price, FireEye shares more than doubled from the $20 IPO price in initial trades Friday morning, opening at $40.30 on the Nasdaq trading floor about 8:15 a.m. Pacific time. By 9 a.m., the end of the morning session in Ne wYork, shares had traded in a range of $40 to $45.51.

FireEye arrived at a $20 price after initially stating that it wanted to sell shares in a range from $12 to $14. After bumping that range to $15-to-$17 on Tuesday, the company decided to jump higher Thursday night while also selling more shares than it had planned, 15.2 million. All told, FireEye's IPO took in $303.5 million at a valuation of more than $2.3 billion.

Milpitas-based FireEye was founded in 2004 by former Sun Microsystems engineer Ashar Aziz. The company, whose hardware and software help block cyberattacks, counts more than 60 federal agencies among its 1,000-plus customers, including the FBI and U.S. Department of Defense. Others that pay for the company's services include banks, utility companies and UC Berkeley.

In December, Aziz ceded the CEO job to valley software veteran Dave DeWalt, who had been the startup's chairman. DeWalt most notably had been CEO of McAfee before selling the security pioneer to Intel (INTC) for $7.7 billion, and his ascension to the top spot at FireEye was widely seen as proof the company was on the IPO fast track.

FireEye has raised $100 million in private capital from backers including Sequoia Capital, Norwest Venture Partners and In-Q-Tel, the CIA's venture arm; Sequoia and Norwest each own 20 percent of the company, according to its SEC filings. Three other valley finance heavyweights -- DAG Ventures, JAFCO Ventures and Silicon Valley Bank -- collectively own nearly 25 percent.

In addition, Aziz -- now FireEye's vice chairman and chief technology officer -- owns 10 percent, which is worth more than $230 million at the IPO price. DeWalt's 4 percent stake would be good for $92 million.

The company has reported rapid growth: Head count shot from 175 employees at the end of 2011 to more than 900 this past June. Revenues grew eightfold from 2010-2012, to more than $83 million, thanks in part to a subscription model that requires customers to sign up for a cloud-based malware information service.

But the company's operating losses also have soared due to R&D, sales and marketing costs: FireEye reported that it lost $63.5 million in 2012, and it has never posted a profit.

(c)2013 the San Jose Mercury News (San Jose, Calif.)

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Original headline: FireEye's price more than doubles on Wall Street after eye-popping IPO

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