Q&A: FireEye CEO And Worldwide Sales EVP Discuss Channel Transformation, Strong Q1 Performance And New Products

Top FireEye Execs Sound Off

FireEye has been going through a channel transformation – looking to reverse its faltering approach to partners and drive more sales through the channel. In an interview with CRN before the company's first quarter earnings call, CEO Kevin Mandia and EVP of Worldwide Sales Bill Robbins said that push is starting to pay off, with partners starting to re-engage with the Milpitas, Calif.-based security vendor and a strong Q1 earnings report. The executives said that push would continue, with FireEye launching new partner-ready products and continuing to hold true to its new rules of engagement with the channel. That push comes as FireEye also looks to continue to innovate – rolling out a new Helix security platform, HX endpoint security – and push towards profitability. Take a look at what the executives had to say about the company's progress and what to expect in the months to come.

What were some of the highlights from FireEye's first quarter?

Mandia (pictured): I look at it as a quarter where we did what we said we were going to do. It was kind of a bridging quarter as we strive for growth in the second half of this year. When I got the job about a year ago, I knew we had to create new technology and do so with a sense of urgency: we had to innovate, and we had to restructure our costs. I think we did a great job. When you look at Q1's performance, we did great on the bottom line, and then we did the innovations we needed to do to make sure we have second half growth this year, or at least I believe it postures us well for second half growth.

What jumped out at me most was we were operating at a loss of about $73 million a year ago. This year we brought that down by about $60 million to have a net loss of $13 million. That's good progress ... We have become an efficient company as we transform our products.

What sort of progress has FireEye seen as it looks to change how it works with partners?

Robbins (pictured): We have to just go out and do what we say we are going to do: execute, repair some damage in some places, and rebuild and focus our effort on the channel. While I think it's an ongoing process, I'm really pleased with what we've done over the past five months. I do believe our results in Q1 are reflective of some of the progress and momentum that we're getting with the channel … [We] acknowledge the partnership and the increased effort that we're seeing from the channel, which is great to see some of that engagement, and maybe people have been willing to give us a chance to make things right and to rebuild … That's a start – it's not the finish line – but we did that over the last five months, and it showed dividends for us in Q1, and I'm pretty optimistic about the balance of the year.

What evidence do you see that relationships with partners are improving?

Robbins: A lot of the checks that we do internally, as well as some of the checks that I've seen externally from different market sources and from a number of the Wall Street analysts that cover us, have been at a minimum stabilized to most of them have been positive in terms of the feedback … I think the biggest thing quantitatively is that we saw a pretty meaningful increase in the amount of deal registered opportunities that showed up in our actual results … That's the empirical data. Deal registration is up, and not just deal registrations but also closures as a percentage of our quarterly results. As I look into our Q2 and second half pipeline, I see that part of our business growing as well. When I take all of the more qualitative niceties of channel checks and getting feedback and being on the road and talking to partners and visiting partners and trying to build the relationship side, fundamentally the metrics are also showing improvement, and that gives me a reason for optimism that we're on the right track.

How important is getting that sales momentum right? I know some of the competition has stumbled there in their quarterly earnings.

Robbins: It's a top two or three priority. I just can't be more clear to my team or to the marketplace in general that our success is going to be dependent on having a good, strong, healthy, vibrant channel. You're absolutely right – a number of our competitors and folks in the technology space have stumbled a bit on that recently ... I think that, combined with us doing what we say we're going to do, that combined with some others maybe taking a bad step in terms of their relationship has absolutely opened up the aperture for us to get a broader share of the channel mindshare, as well as share of wallet coming through the channel. I think more channel partners are starting to come back to us and they are getting excited about Helix and HX [endpoint security] in the second half of the year.

Do you see a lot of traction for the Helix platform?

Robbins: It's early days – we just launched it literally the last day of the quarter on March 31. That being said, we closed four Helix deals in the quarter, which we really frankly didn't think we'd close any with it being a March 31 launch date. All four of those were done via channel partners – I'm very excited about that. We put a lot of pre-selling effort into it with the channel to show that this is a product that they can sell that will allow them to build a stickier relationship with the customers and to leverage and build their services practice around our Helix platform. I think that really resonated with the partner base … While it's only four [deals so far], it definitely was an early success, and it was a good interaction with the channel partners. We are seeing quite a bit of that new channel registration pipeline involve the Helix platform … It was also really broad based – it was four different industries that we did this into and two customers were brand new customers to FireEye. That was a great example of FireEye and the channel working together to expand our market reach.

What sort of early traction do you see for endpoint security and HX?

Robbins: That's a big area … We have rolled out and funded an entirely incremental business plan around HX to get a strong launch with that … We're doing a lot of things around deal registration and incentives to go take market share from the endpoint … We're starting to see that pipeline and interest grow … I hope and I think we're doing all of the right things to be ready to launch that [in Q3] and launch it successfully … We're trying to truly make this a win-win for our partners, starting with the distributors and some of the big LARs and CARs out there, all the way down to the VAR community … I think HX honestly is the first true channel-ready, channel-centric product that FireEye has ever brought to market. We're just going to swing for the fences on this one. We're going to make the investment. I think the product is going to be compelling and very disruptive to the traditional antivirus endpoint market. If we can roll out a great product with the right FireEye sales and marketing behind it and turn our channel loose with the right incentives and enablement, I think it is something we should be very excited about.

What sort of threats do you see in the market that partners should be paying attention to?

Robbins: We continue to see a large number of breaches. I'm not sure if we have the exact number for Q1, but the number of breaches that are out there are not dissipating. They are coming from the traditional sources, but also some new areas … You will see some interesting thing coming from us very soon … in terms of the threat landscape and where we see some of these threats originate from. I think what our partners need to continue to be aware of is that the threat landscape continues to evolve and the number of breaches that is out there is equal to, if not greater than, what we have historically seen – they are different in nature and more targeted. It certainly is creating security risk for customers and customers are continuing to spend intelligently and really trying to make sure they are positioned to do everything they can to prevent a breach while also recognizing that breaches are pretty much inevitable and they want to be prepared when those breaches do occur.

Any other messages for partners?

Robbins: What I would say is that you will very clearly hear me say thank you to the partners. While I realize those are just words, I think it's reflective of the fact that it's important enough to us to recognize that we put a lot of hard work into the last five months, specifically in Q1, and we started to see some good results. We're getting out in front of all the Wall Street analysts, all of the shareholders, and all of our employees and right off the bat both Kevin and I are talking about the importance of the channel to us. This isn't something we're just saying to try and smooth things over for 60 days, this is a continued and enforced the message of how we are going to go to market. I think we set a really good foundation in Q1 for things like the HX launch, which really is going to be the first really channel-ready, channel-focused product that FireEye has ever launched. I think our partners should be excited about what the rest of 2017 is going to bring.