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It Could Be a Very Happy New Year for FireEye

Lots of market upside, budget dollars – and yes, competition

Ah, December. Time to reflect on the past year and look ahead to 2014. In retrospect, 2013 was a banner year for the security industry as the world finally woke up to the very real perils of cybersecurity. Of all the events of this year however, FireEye’s IPO may have trumped them all. As I write this blog on December 11, 2013, FireEye’s market cap is just north of $4.5 billion. Wow! Yup, Wall Street loves a hot market and a timely IPO – check and check for FireEye. Okay but when the New Year’s Eve champagne turns into the New Year’s Day hangover, what’s in store for FireEye in 2014? According to ESG research, it could be a very Happy New Year for FireEye indeed because: 1. The market is poised for tremendous growth. In a recent survey, ESG asked 198 security professionals working at enterprise organizations (i.e. more than 1,000 employees) if their organizations had deployed network anti-malware/sandboxing technology (a la FireEye). Fourteen percent have done so “extensively,” 25% are in early pilot projects, 27% are doing proof-of-concept testing, 13% plan to implement network anti-malware/sandboxing technology within the next 24 months, and 16% have no specific plans but are interested in deploying this type of technology. With lots of purchasing and deployment activity ahead, FireEye looks like it is in the right place at the right time – again. 2. Budget dollars should be available. A vast majority (74%) of enterprises have increased their security budgets “significantly” or “somewhat” as a direct response to malware threats like APTs over the past 2 years. Additionally, 55% of enterprises claim that they have allocated specific budget dollars for new types of anti-malware technologies. In the past, FireEye purchases involved a lot of budgetary horse trading as CISOs had to rob from multiple budgets to allocate the appropriate funds. Moving forward, money should be more readily available. 3. FireEye has become the mindshare king of this space. Like a Rorschach test, security professionals see a picture of advanced malware detection technology and immediately equate it with FireEye. This gives the company a seat at the table for nearly every RFI/RFP. In addition, FireEye will continue to benefit from overall confusion about this technology space – ESG found that only 16% of enterprise security professionals say they are “very familiar” with network anti-malware/sandboxing technology while the rest are either learning about it or in the dark. In a confusing market, FireEye will continue to stand out as the market leader. FireEye has a lot of things going for it – green field market opportunities, available budget dollars, and a thought leadership position. Nevertheless, it will face much stiffer competition in 2014 from multiple angles. Cisco (Sourcefire), McAfee, and Trend Micro will pitch anti-malware integration across endpoints and networks. Blue Coat, Hexis Cyber Solutions, and LogRhythm will trumpet big data security analytics solutions as an alternative. Check Point, Fortinet, and Palo Alto Networks will use their market momentum and NGFW leadership to aggregate network anti-malware functionality within its gateway (note: when asked where network anti-malware/sandboxing technology should reside, 58% of enterprise security professionals said it should be integrated into next-generation firewalls. This gives PAN a clear competitive advantage). Additionally, the Sand Hill Rd. crew has a ton of cash and will fund at least a half-dozen “FireEye killer” startups. So the bad news is that FireEye will face more competition in 2014 but the good news is that the company will enter the New Year in a position of strength from multiple market angles. What more could you ask Santa for?

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