CORRECTED-UPDATE 2-FireEye surges in debut, puts cybersecurity in spotlight
(Corrects company name to "Ping Identity" from "Ping Security," paragraph 10)
Sept 20 (Reuters) - Shares of cybersecurity firm FireEye Inc almost doubled in value in their trading debut on Friday, spotlighting cybersecurity firms on Wall Street and inspiring at least one industry peer to accelerate plans to go public.
FireEye, on track to become one of the year's five strongest first-day showings, marks the latest in a string of successful public offerings from tech companies including ad tech company Rocket Fuel Inc, which also priced on Thursday.
Companies are pursuing public offerings as stock markets climb, the result of an easy monetary policy and a gradually recuperating U.S. economy. This week, the Federal Reserve took a surprise decision to maintain its monthly purchases of $85 billion in bonds that have kept rates low and boosted investors' risk appetite - a boon for equity markets.
FireEye and ad technology firm Rocket Fuel Inc, which also went public on Friday and whose shares have more than doubled in value, are helping to set the stage for a slew of other high profile technology offerings expected later this year and 2014. These include Twitter, Box and Dropbox.
Analysts say cybersecurity firms in particular are in high demand, because of the scarcity of public corporations in that space and the growing threat of online crime across the globe.
Businesses, increasingly frustrated as they constantly discover computer viruses in their networks, are looking to FireEye and other startups to provide them with technologies to augment anti-virus software.
"Security is hot. This will open the door for more companies to do this," said Kim Forrest of Fort Pitt Capital Group.
Jay Chaudhry, chief executive of cybersecurity firm Zscaler, told Reuters his company will push plans for its IPO ahead by six to nine months, following the success of FireEye's IPO.
"The window is open," he said.
Others are more patient. Andre Durand, CEO of Ping Identity, said the hot reaction to FireEye won't affect the timing of his firm's IPO which is slated for next year or 2015.
"This is good for everybody in security," George Kurtz, CEO of cybersecurity startup CrowdStrike, said of the FireEye IPO. "It shows that there are a lot of legs in the security market going forward as the security market emerges."
FireEye uses cloud-based technologies to help businesses fight off computer viruses that evade old-school anti-virus software made by companies including Symantec Corp and Intel Corp's McAfee security division.
It says that it is responsible for uncovering about 80 percent of all "zero-day" attacks - a highly sophisticated type of cyber threat - discovered this year by security firms.
However, its valuation may raise some eyebrows among investors who still recall the dotcom bubble, when unprofitable companies debuted with outsized growth expectations.
FireEye has yet to post a profitable quarter since it was founded in 2004. It spent more on sales and marketing in the first six months of its current fiscal year than it generated in revenue, contributing to a $63 million operating loss for the period.
Shortly before the market close, the stock was nearly double its $20 IPO price at $37.65.
That valued the company at more than $4.37 billion, or a lofty 32 times this year's projected revenue of $150 million, according to 451 Group analyst Brenon Daly.
That gives it a much richer value than other cybersecurity firms that have gone public in the past few years.
Palo Alto Networks Inc, which went public in July 2012, trades at 8.5 times its annual revenue and Imperva Inc trades at about 11 times revenue on the NYSE, Daly said.
FireEye sold about 15.2 million shares at $20 each, above its proposed price range, raising about $304 million from the offering. All the shares in the IPO were sold by the company.
DeWalt, former CEO of McAfee who sold that company to Intel, said in an interview he thought the company was "fairly valued" and that he has intentionally boosted spending, racking up losses, to build up an infrastructure to support future growth.
"We have a heck of an opportunity," he said.
He estimated operating margins of 20 to 25 percent within four to six years from now.
Some investors, like Tim Ghriskey, said they understood the appeal of his proposition, but that it was too risky.
"The valuation (of FireEye) is astronomical, but so is the revenue growth rate," said Ghriskey, chief investment officer with Solaris Asset Management, who did not add any FireEye shares to the $1.5 billion he helps manage.
"For many investors this is nosebleed territory - especially since the stock has opened at twice the IPO price," he added.
(Reporting by Jim Finkle; Additional reporting by Nicola Leske and Olivia Oran in New York, Neha Dimri and Sagarika Jaisinghani; in Bangalore; Editing by James Dalgleish and Richard Chang)