Revenue/Billing & 4Q Outlook Improved Path ...

[Pages:9]November 5, 2015

Stock Rating:

OUTPERFORM

12-18 mo. Price Target FEYE - NASDAQ

$47.00 $29.12

3-5 Yr. EPS Gr. Rate 52-Wk Range

Shares Outstanding Float Market Capitalization Avg. Daily Trading Volume Dividend/Div Yield Book Value Fiscal Year Ends 2015E ROE LT Debt Preferred Common Equity Convertible Available

15% $55.33-$26.03

148.9M 91.0M $4,642.3M 5,084,717 NM/NM $7.67

Dec 1.0 % $0.0M

NA $1,183M

Yes

EPS Diluted

Q1 Q2 Q3 Q4 Year Mult.

2014A

(0.53) (0.55) (0.51) (0.38) (1.98) NM

2015E (0.48)A (0.41)A (0.37) (0.37) (1.63) NM

Prior (E)

--

-- (0.46) (0.40) (1.75) NM

2016E

NA NA NA NA (1.28) NM

Prior (E)

--

--

--

-- (1.35) NM

EQUITY RESEARCH

QUARTERLY UPDATE

TECHNOLOGY/INFRASTRUCTURE SOFTWARE

FireEye, Inc.

Improved Path To Profitability Offset By Muted 3Q Revenue/Billing & 4Q Outlook

SUMMARY FEYE reported mixed 3Q15 results with revenue and billing coming short of consensus, but non-GAAP operating margin and cash-flow from operations still beating consensus estimates. Solid demand trends in US and APAC were offset by weak European performance which is part of the muted 4Q outlook. We believe a combination of internal execution issues coupled with European softness are behind the lukewarm performance. We maintain our Outperform rating as after-market valuation levels at 3.9X EV/FY16 revenue are attractive in our view, yet lower our PT to $47 from $58.

KEY POINTS 3Q15 Recap: FEYE reported revenue of $165.6M, up 45% YoY vs. Street's

estimate of $167.1M. Loss per share of ($0.37) was better than consensus' ($0.45) estimate. Billings of $210.6M grew 28% YoY but came below Street's estimate of $227.2M.

Positives: Despite the muted revenue/billings performance, non-GAAP operating margins of (32%) exceeded consensus' estimate of (39.2%) given improved operational controls as FEYE accelerates its path to profitability. Cash from operations of ($8.3M) positively surprised vs. Street's expectation of ($34.3M).

Negatives: Product revenue of $60.1M came shy of Street's estimate of $61.3M. The weak billing performance of $210.6M vs. Street's $227.2M est. was driven by weak European performance and a tough YoY compare in contract length size given a 3Q14 large five-year order that extended average contract length to 34 months (current rate is 29.9 months).

Estimates: For 4Q15, FEYE guided to $182-190M revenue, EPS of ($0.38)($0.36), and billings of $240-260M. Our 4Q15 estimates go to $186M/($0.37) from $198.8M/($0.40). For FY15, we are adjusting our estimates to $624.2M/($1.63) from $637.5M/($1.75). For FY16E, we go to $862M/($1.28) from $881.2M/($1.35).

Bottom Line: While we are discouraged by the lukewarm performance we believe after-market valuation level of 3.9X EV/FY16 revenue is not to be ignored. We note the M&A option is also highly viable long-term, given a rapidly consolidating cyber security arena.

Shaul Eyal 212-667-8411

Shaul.Eyal@

Stock Price Performance

Company Description FireEye, Inc. develops virtual machinebased security platforms that provide real-time protection to enterprises and governments worldwide against advanced persistent threats (APTs) and advanced malware. Founded in 2004, FireEye is headquartered in Milpitas, CA.

For analyst certification and important disclosures, see the Disclosure Appendix.

Oppenheimer & Co Inc. 85 Broad Street, New York, NY 10004 Tel: 800-221-5588 Fax: 212-667-8229

FireEye, Inc.

FEYE (OUTPERFORM) - $47.00

5-YEAR PRICE PERFORMANCE

120

100

80

60

40

20

0 2014

2015

FEYE

Source: Bloomberg

BASE CASE ASSUMPTION

FEYE's Threat Prevention platform continues to see continued broad market adoption

Cumulative license per customer growth remains solid

INVESTMENT THESIS

FEYE has established itself as a leader in the specialized threat analysis protection market, and we believe the company has a SAM (served addressable market) of $1.2B. The company believes its technology will at first supplement, but then over time replace, traditional signature-based solutions, which would result in a TAM (total addressable market) of $13.1B.

FEYE has over 3,700 end-user customers in various verticals in over 160 countries around the world.

CATALYSTS 4Q15 Earnings New product introductions and greater subscription attach rates

UPSIDE SCENARIO

Expansion among existing customers and sustained customer adoption ahead of expectations

Profitability goals reached ahead of expectations

DOWNSIDE SCENARIO

New products fail to gain significant traction Market share loss Lack of progress towards reaching profitability

PRICE TARGET CALCULATION

We apply a 7.9x multiple to our 2016 revenue estimate of $862M, deriving an enterprise value of $6.8B. Adding back net cash of $500.7M and dividing by the diluted outstanding shares of 154.1M, we arrive at our $47 price target. We believe the premium is warranted due to the underpenetrated market opportunity FEYE has in the enterprise space for threat-management solutions.

KEY RISKS

Risks to our price target include: increased competition, a challenging overall macro environment, moderating IT spending, change in acceptance of the company's products, and ability to demonstrate consistent financial performance.

Shaul Eyal: 212-667-8411 2

FEYE (OUTPERFORM) - $47.00

FireEye, Inc.

Income Statement Product Revenue Services Revenue

Total Revenue Total Cost of Revenue Gross Profit Research and Development Sales and Marketing General and Administrative

Total operating expenses Operating Income (loss)

Total Other Income Income (loss) before income taxes Provision for Income taxes Net Income (loss) Non-GAAP EPS WA Shares Outstanding diluted Source: Company Data, Oppenheimer & Co. Estimates.

FY 2013A

88.3 73.3 $161.6

44.2

117.3

59.1 156.5

35.6 251.2

(133.9)

(4.2)

(138.0)

0.3

(138.3)

($3.33)

41.6

Mar-14A 24.3 49.7

$74.0

Quarter Ending

Jun-14A Sept-14A

37.7

48.4

56.8

65.8

$94.5 $114.2

Dec-14A 67.9 75.0

$143.0

23.9

29.7

33.0

38.0

50.1

64.8

81.2

105.0

37.4 65.2 17.7 120.3

45.6 75.5 20.7 141.9

47.1 85.9 20.8 153.7

44.2 95.2 22.1 161.5

(70.2)

(77.1)

(72.5)

(56.5)

(0.0)

(0.2)

(0.4)

(0.7)

(70.2)

(77.2)

(72.9)

(57.2)

1.2

1.3

0.9

(0.6)

(71.4)

(78.5)

(73.9)

(56.6)

($0.53) ($0.55) ($0.51) ($0.38)

134.0

141.9

144.9

147.7

($ and Shares in Thousands, Except Per Share Figures)

FY 2014A

178.2 247.4 $425.7

124.6

301.1

174.2 321.8

81.4 577.4

(276.3)

(1.3)

(277.6)

2.8

(280.4)

($1.98)

142.1

Mar-15A 40.2 85.1

$125.4 36.9 88.5 49.6 87.9 21.9

159.4 (70.8)

(0.5) (71.3)

1.0 (72.3)

($0.48)

151.7

Quarter Ending

Jun-15A Sept-15A

49.7

60.1

97.5

105.5

$147.2 $165.6

40.0

44.6

107.2

121.1

52.3 93.4 21.7 167.4

54.5 95.3 24.4 174.2

(60.2)

(53.1)

(1.4)

(3.1)

(61.6)

(56.2)

0.9

0.6

(62.6)

(56.8)

($0.41) ($0.37)

154.1

154.5

Dec-15E 73.8

112.2 $186.0

50.2 135.8

57.7 107.9

25.1 190.7 (54.9)

(3.0) (57.9)

0.6 (58.5)

($0.37)

156.0

FY 2015E

223.8 400.4 $624.2

171.7

452.5

214.0 384.5

93.1 691.6

(239.1)

(8.0)

(247.1)

3.1

(250.2)

($1.63)

154.1

FY 2016E

262.6 599.3 $861.9

228.3

633.6

252.8 466.3 114.3 833.4

(199.8)

0.0

(199.8)

4.3

(204.1)

($1.28)

159.4

FireEye, Inc.

3

FireEye, Inc.

FEYE (OUTPERFORM) - $47.00

FireEye, Inc.

Margin Analysis Gross Margin

Research & Development Sales & Marketing General & Administrative

Operating Margin

Pre-Tax Margin Effective Tax Rate Net Income Margin

Sequential Growth Rates Revenue Service Revenue

Total Revenue

Research & Development Sales & Marketing General & Administrative Operating Income Net Income EPS

Year-on-year Growth Rates Total Revenue

Gross Profit Operating Income Pre-Tax Income Net Income Diluted EPS WA Shares Outstanding

Source: Company Data, Oppenheimer & Co. Estimates.

FY 2013A

72.6%

36.6% 96.9% 22.1%

-82.9%

-85.4% -0.2%

-85.6%

Mar-14A 67.7%

50.5% 88.1% 23.9%

-94.9%

-94.9% -1.7%

-96.5%

Quarter Ending

Jun-14A Sept-14A

68.6%

71.1%

48.3% 80.0% 21.9%

41.2% 75.2% 18.2%

-81.6% -63.5%

-81.7% -1.6%

-83.1%

-63.9% -1.3%

-64.7%

Dec-14A 73.4%

30.9% 66.6% 15.4%

-39.5%

-40.0% 1.0%

-39.6%

FY 2014A

70.7%

40.9% 75.6% 19.1%

-64.9%

-65.2% -1.0%

-65.9%

Mar-15A 70.6%

39.5% 70.1% 17.4%

-56.5%

-56.9% -1.4%

-57.7%

Quarter Ending

Jun-15A Sept-15A

72.8%

73.1%

35.5% 63.5% 14.7%

32.9% 57.5% 14.7%

-40.9% -32.1%

-41.9% -1.5%

-42.5%

-33.9% -1.1%

-34.3%

Dec-15E 73.0%

31.0% 58.0% 13.5%

-29.5%

-31.1% -1.0%

-31.4%

FY 2015E

72.5%

34.3% 61.6% 14.9%

-38.3%

-39.6% -1.3%

-40.1%

FY 2016E

73.5%

29.3% 54.1% 13.3%

-23.2%

-23.2% -2.2%

-23.7%

-24.9% 99.2% 29.2%

97.4% 25.8% 65.6%

NM NM NM

55.4% 14.2% 27.7%

22.0% 15.9% 17.0%

NM NM NM

28.4% 15.9% 20.9%

3.2% 13.6%

0.4% NM NM NM

40.4% 14.0% 25.2%

-6.1% 10.9%

6.1% NM NM NM

-40.8% 13.4% -12.3%

12.2% -7.7% -1.0%

NM NM NM

23.5% 14.5% 17.4%

5.5% 6.3% -0.7%

NM NM NM

20.9% 8.2%

12.5%

4.3% 2.0% 12.4%

NM NM NM

22.8% 6.3%

12.3%

5.8% 13.2%

2.9% NM NM NM

93.9%

78.2% NM NM NM NM

315.6%

160.3%

130.1% NM NM NM NM

1239.8%

184.4%

176.9% NM NM NM NM

1319.0%

167.8%

166.9% NM NM NM NM

358.8%

149.7%

151.5% NM NM NM NM

28.9%

163.5%

156.6% NM NM NM NM

242.0%

69.5%

76.7% NM NM NM NM

13.2%

55.8%

65.4% NM NM NM NM

8.6%

45.0%

49.1% NM NM NM NM

6.6%

30.1%

29.3% NM NM NM NM

5.6%

46.6%

50.3% NM NM NM NM

8.4%

38.1%

40.0% NM NM NM NM

3.4%

4

FEYE (OUTPERFORM) - $47.00

FireEye, Inc.

Balance Sheet Assets Cash & Cash Equivalents Accounts receivable Inventories Deferred costs, deffered assets,current portion Prepaid expenses and other current assets Total Current Assets

Deferred costs of revenue, non-current portion PPE, net Goodwill Intangible assets Deposits and other LT assets Total Assets

Liabilities and Equity Accounts payable Accrued liabilities Accrued compensation LT debt, current portion Proceeds from early exercise of stock awards Deferred revenue, ST Total current liabilities

LT debt, non-current portion Deferred revenue, LT Preferred stock warrant liability Other Long-Term Liabilities Total Liabilities

Total Stockholders Equity (deficit) Total Liabilities & Equity

Source: Company Data, Oppenheimer & Co. Estimates.

FY 2013A

Quarter Ending Mar-14A Jun-14A Sept-14A Dec-14A

$173.9 95.8 5.7 2.0 35.3

$312.7

1.1 64.8 706.3 281.4 10.1 $1,376.3

$584.5 80.5 4.3 1.9 42.3

$713.5

1.9 69.3 708.6 271.3

8.3 $1,772.7

$464.5 108.0 5.2 21.7 31.9

$631.3

0.0 78.4 750.1 284.8 10.0 $1,754.7

$397.9 155.8 5.8 26.8 31.5

$617.7

0.0 84.1 750.3 273.3 10.4 $1,735.8

$402.2 193.2 8.0 25.1 28.7

$657.1

0.0 82.3 750.3 261.6

7.5 $1,758.9

FY 2014A

Quarter Ending Mar-15A Jun-15A Sept-15A Dec-15E

$402.2 193.2 8.0 25.1 28.7

$657.1

0.0 82.3 750.3 261.6

7.5 $1,758.9

$397.6 160.1 10.5 22.0 27.5

$617.6

0.0 81.0 750.3 249.9

7.2 $1,706.0

$1,189.6 105.1 10.5 25.1 32.7

$1,363.0

0.0 74.4 750.3 238.1

6.8 $2,432.7

$1,169.9 140.9 11.6 26.4 30.6

$1,379.5

0.0 73.1 750.3 226.3

6.2 $2,435.5

$1,141.8 178.6 13.2 31.7 34.2

$1,399.5

0.0 100.4 750.3 226.3

6.2 $2,482.8

FY 2015E

$1,141.8 178.6 13.2 31.7 34.2

$1,399.5

0.0 100.4 750.3 226.3

6.2 $2,482.8

34.1 9.2

41.6 0.0 8.2

110.5 $203.6

0.0 77.0

0.0 47.6 $328.2

1,048.1 $1,376.3

24.9 15.3 47.3

0.0 5.9 121.4 $214.9

0.0 91.3

0.0 42.8 $348.9

1,423.8 $1,772.7

36.3 23.3 52.7

0.0 0.0 136.8 $249.2

0.0 95.2

0.0 46.6 $391.0

1,363.7 $1,754.7

30.2 20.6 66.3

0.0 0.0 160.8 $277.8

0.0 122.2

0.0 42.6 $442.6

1,293.1 $1,735.8

34.1 24.6 64.6

0.0 0.0 203.9 $327.1

0.0 148.7

0.0 32.3 $508.1

1,250.8 $1,758.9

34.1 24.6 64.6

0.0 0.0 203.9 $327.1

0.0 148.7

0.0 32.3 $508.1

1,250.8 $1,758.9

28.5 26.1 61.9

0.0 0.0 217.2 $333.7

0.0 161.6

0.0 31.2 $526.4

1,179.6 $1,706.0

25.3 27.3 63.7

0.0 0.0 232.5 $348.8

689.0 177.4

0.0 34.9 $1,250.0

1,182.6 $2,432.7

33.6 30.4 73.0

0.0 0.0 265.9 $403.0

697.5 189.0

0.0 36.3 $1,325.8

1,109.7 $2,435.5

37.2 30.4 74.4

0.0 0.0 293.9 $435.9

697.5 230.6

0.0 36.3 $1,400.4

1,082.4 $2,482.8

37.2 30.4 74.4

0.0 0.0 293.9 $435.9

697.5 230.6

0.0 36.3 $1,400.4

1,082.4 $2,482.8

($,000)

FY 2016E

$1,053.4 310.8 21.3 66.0 46.7

$1,498.2

0.0 162.5 750.3 226.3

6.2 $2,643.6

40.6 30.4 101.6

0.0 0.0 365.6 $538.2

697.5 304.6

0.0 36.3 $1,576.7

1,066.9 $2,643.6

FireEye, Inc.

5

FireEye, Inc.

FEYE (OUTPERFORM) - $47.00

FireEye, Inc.

Cash Flow Statement Cash Flow from Operations Net Income

Adj. to reconcile net loss to net cash

Accounts receivable, net Inventories Prepaid expenses and other assets Deferred costs of revenue Accounts payable Accrued liabilities Accrued compensation Deferred revenue Other long-term liabilities

(Inc.) Dec. in Operating Working Capital

Net Cash Flow from Operations

Cash Flow from Investing Activities Acquisition of business, net of cash acquired PPE Purchase of ST investments Maturities of ST investments Proceeds from disposal of PPE Lease deposits Net Cash Flow from Investing

Cash Flow from Financing Activities Borrowing from line of credit Repayment of line of credit Borrowing of term loan Repayment of term loan Payments of costs related to IPO/Secondary Proceeds from IPO/Secondary Proceeds from issuance of convt. Pref. stock/debt Proceeds from exercise of equity awards Repayment of notes receivable from stockholders Repurchase of common stock Net Cash Flow from Financing Activities

FX effect Beginning Cash Balance Total Change in Cash Ending Cash Balance

Source: Company Data, Oppenheimer & Co. Estimates.

FY 2013A

Quarter Ending Mar-14A Jun-14A Sept-14A Dec-14A

FY 2014A

Quarter Ending Mar-15A Jun-15A Sept-15A Dec-15E

FY 2015E

($120.6) (125.4)

(35.1) (3.1)

(15.6) (1.6) 11.5

(18.8) 19.4 95.0

4.0 55.6

($69.8)

($101.2) (62.7)

15.2 1.4 (2.1) (0.4)

(12.4) 6.0 5.7

25.2 1.5

40.2

($22.6)

($116.8) (67.9)

(26.9) (0.7) (0.2) (0.4) 5.3 2.7 5.1 19.0 2.0 6.0

($61.9)

($120.0) (61.6)

(48.4) (0.6) 0.1 0.8 (1.3) (2.1) 14.6 50.9 1.0 15.1

($46.5)

($105.7) (43.1)

(37.1) (2.2) 3.6 0.0 5.2 4.7 (1.8) 69.6 0.8 42.9

($0.3)

($443.8) (235.4)

(97.2) (2.0) 1.5 0.0 (3.2) 11.4 23.7

164.7 5.3

104.1

($131.3)

($134.0) (56.9)

32.7 (2.6) 0.1 0.0 (4.2) 2.1 (2.7) 26.2 2.0 53.7

($3.2)

($133.6) (45.2)

54.1 (0.8) (2.5) 0.0 (1.8) 1.8 1.7 31.1 0.6 84.2

$39.1

($135.5) (39.5)

(36.0) (1.7) 3.4 0.0 7.3 3.7 9.3 45.0 0.2 31.2

($8.3)

($141.1) (37.9)

(37.6) (1.6) (3.6) (5.3) 3.6 0.0 1.4 69.7 0.0 26.4

($11.4)

($544.2) (179.5)

13.3 (6.6) (2.6) (5.3) 4.9 7.6 9.7 172.0 2.7 195.6

$16.2

($,000)

FY 2016E

($483.1) (22.3)

(132.2) (4.7)

(12.5) (34.3)

3.4 0.0 27.2 145.7 0.0 (7.4)

($29.7)

(89.2) (57.6)

0.0 0.0 0.0 (1.7) ($148.5)

0.0 (14.2) (143.5)

0.0 0.0 (0.4) ($158.1)

(55.1) (17.3) (151.0)

0.0 0.0 (0.0) ($223.4)

0.0 (24.0) (57.9) 50.8

0.0 (0.2) ($31.2)

0.0 (12.2) (38.0) 80.3

0.0 0.1 $30.2

(55.1) (67.7) (390.4) 131.1

0.0 (0.5) ($382.5)

0.0 (12.7) (39.9) 34.7

0.0 (0.4) ($18.2)

0.0 (11.9) (261.4) 57.5

0.0 (0.4) ($216.2)

0.0 (12.7) (338.9) 67.0

0.0 0.2 ($284.4)

0.0 (20.0)

0.0 0.0 0.0 0.2 ($19.8)

0.0 (57.2) (640.2) 159.1

0.0 (0.5) ($538.7)

0.0 (71.8)

0.0 0.0 0.0 0.6 ($71.2)

10.0 (20.0)

0.0 (2.2) 0.0 321.4 10.0 5.4 7.3 0.0 $331.9

$0.0 $60.2 $113.7 $173.9

0.0 0.0 0.0 0.0 0.0 445.9 0.0 2.1 0.0 0.0 $448.0

$0.0 $173.9 $267.4 $441.3

0.0 0.0 0.0 0.0 0.0 (0.7) 0.0 16.3 0.0 0.0 $15.7

$0.0 $441.3 ($269.7) $171.6

0.0 0.0 0.0 0.0 0.0 (0.9) 0.0 5.9 0.0 0.0 $5.0

$0.0 $171.6 ($72.8)

$98.8

0.0 0.0 0.0 0.0 0.0 0.0 0.0 17.6 0.0 0.0 $17.6

$0.0 $98.8 $47.5 $146.4

0.0 0.0 0.0 0.0 0.0 444.3 0.0 41.9 0.0 0.0 $486.2

$0.0 $173.9 ($27.6) $146.3

0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.9 0.0 0.0 $11.9

$0.0 $146.4

($9.6) $136.8

0.0 0.0 0.0 0.0 0.0 0.0 897.0 19.8 0.0 (150.0) $766.8

$0.0 $136.8 $589.7 $726.5

0.0 0.0 0.0 0.0 0.0 0.0 (0.5) 3.6 0.0 0.0 $3.1

$0.0 $726.5 ($289.6) $436.9

0.0 0.0 0.0 0.0 0.0 0.0 (0.5) 3.6 0.0 0.0 $3.1

$0.0 $436.9 ($28.1) $408.8

0.0 0.0 0.0 0.0 0.0 0.0 896.1 38.9 0.0 (150.0) $784.9

$0.0 $146.3 $262.4 $408.7

0.0 0.0 0.0 0.0 0.0 0.0 (1.9) 14.4 0.0 0.0 $12.5

$0.0 $408.7 ($88.4) $320.4

6

FEYE (OUTPERFORM) - $47.00

FireEye, Inc.

Disclosure Appendix

Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report.

Potential Conflicts of Interest:

Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer & Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target price histories, please write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager.

Oppenheimer & Co. Inc. Rating System as of January 14th, 2008: Outperform(O) - Stock expected to outperform the S&P 500 within the next 12-18 months. Perform (P) - Stock expected to perform in line with the S&P 500 within the next 12-18 months.

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FireEye, Inc.

FEYE (OUTPERFORM) - $47.00

Underperform (U) - Stock expected to underperform the S&P 500 within the next 12-18 months.

Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potential conflict of interest.

Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008:

Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments, and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector.

Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due to a perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well than higher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy, aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere.

Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weakness perceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group.

Distribution of Ratings/IB Services Firmwide

Rating

OUTPERFORM [O] PERFORM [P] UNDERPERFORM [U]

Count

351 257

3

IB Serv/Past 12 Mos.

Percent

57.45 42.06

0.49

Count

151 83 0

Percent

43.02 32.30

0.00

Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform.

Company Specific Disclosures

Oppenheimer & Co. Inc. makes a market in the securities of FEYE.

Additional Information Available

Please log on to or write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager.

Other Disclosures

This report is issued and approved for distribution by Oppenheimer & Co. Inc. Oppenheimer & Co. Inc. transacts business on all principal exchanges and is a member of SIPC. This report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider whether such recommendation is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realize losses on investments

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