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Barclays On FireEye: Exec Shuffle Lowers Any Acquisition Premium In Stock

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Barclays On FireEye: Exec Shuffle Lowers Any Acquisition Premium In Stock

Barclays said the recent executive shuffle at FireEye Inc (NASDAQ: FEYE) "lowers any acquisition premium in the stock," which plunged 19 percent after the cybersecurity firm said Chief Executive David DeWalt would step down on June 15 and be succeeded by President Kevin Mandia.

FireEye also appointed Mike Berry as COO. Berry will handle the COO role in addition to his responsibilities as the CFO of the company.

"The management reshuffle is probably negative near term because it arguably lowers the probability of FEYE being acquired given Mr. Dewalt's track record, but probably net neutral given Mr. Mandia and Mr. Berry's operating experiences," analyst Saket Kalia wrote in a research note.

Related Link: UBS Maintains Neutral On FireEye, Raises PT To $18

"Management reshuffles always introduce risk, but we think given Mr. Dewalt's track record of selling companies (McAfee & Documentum), this could make some investors think this probability is lower," Kalia noted.

Guidance And Expectations

The company also cut its full-year revenue outlook to a range of $780 million–$810 million from prior estimate of $815 million–$845 million. Analysts, on average, expect revenue of $828.60 million.

The analyst said the product billings are likely going down 10–12 percent and ratability could hurt revenue.

Meanwhile, the company's FY16 billings estimate remains unchanged at $975 million–$1.055 billion. FireEye reported first-quarter billings of $186 million, which came in above Barclays' $180 million and the Street's $177 million estimate. However, the shift to subscription model is keeping the revenues light.

"Product came in light as more deals shift to subscription and push out, begging questions around market penetration for sandbox appliances and competition," Kalia highlighted.

Kalia has an Equal Weight rating and $19 price target on the stock, which was down 19.46 percent to $12.87 at time of writing.

 

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