Piper Jaffray Downgrades FireEye on Intensifying Competition

• FireEye, Inc. FEYE shares have declined 31.4 percent, year to date, hitting a low of $31.23 on September 29.
• Piper Jaffray’s Andrew J. Nowinski has downgraded the rating on the company to Neutral, while lowering the price target from $60 to $37.
• Nowinski expressed concerns regarding the recent executive turnover at the company, conflict within the channel and intensifying competition.

Analyst Andrew Nowinski believes that the current stock valuation “leaves little room for error if any of the aforementioned issues slow revenue growth.”

With the top four firewall vendors now having their own “sandbox” technology, Nowinski believes that there is increasing competition for FireEye.

With Check Point Software Technologies Ltd. CHKP having recently launched its “SandBlast” technology, Check Point now has technology that is comparable to FireEye’s and could take away about 12.8 percent of the market.

On the other hand, during a recent investor call, Cisco Systems, Inc. CSCO said that its first priority was security and that it aimed to deploy software on top of its existing firewall, rather than “putting another box behind the firewall.”

“We believe this “software-centric” approach is directed at FireEye and could be well-received by customers,” Nowinski stated.

Channel checks have indicated that the Mandiant service competes with the incident response services already being offered. “This is a trend we remain cautious on, as this could lead to resellers shifting focus from FireEye to other vendors… which do not have competitive incident response organizations,” the Piper Jaffray report said.

Following the departure of FireEye’s CFI and CTO/VP of EMEA, Nowinski expressed concerns regarding the disruption that this turnover could cause at the company, “potentially impacting product development or sales growth.”