Case 5:14-cv-05204-EJD Document 72 Filed 06/29/15 Page 1 of 84 1 Lionel Z. Glancy (#134180) Ex Kano S. Sams II (#192936) 2 Robert V. Prongay (#270796) GLANCY PRONGAY & MURRAY LLP 3 1925 Century Park East, Suite 2100 Los Angeles, California 90067 4 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 5 Email: [email protected] [email protected] 6 [email protected] 7 Attorneys for Lead Plaintiff Vijay Fadia and Co-Lead Counsel for the Class 8 Jonathan Gardner (pro hac vice) 9 Angelina Nguyen (pro hac vice) LABATON SUCHAROW LLP 10 140 Broadway New York, New York 10005 11 Telephone: (212) 907-0700 Facsimile: (212) 818-0477 12 Email: [email protected] [email protected] 13 Attorneys for Lead Plaintiff State-Boston 14 Retirement System and Co-Lead Counsel for the Class 15 UNITED STATES DISTRICT COURT 16 NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION 17 ) 18 Case No.: 5:14-cv-05204-EJD 19 IN RE FIREEYE, INC. 20 SECURITIES LITIGATION CONSOLIDATED AMENDED CLASS 21 ACTION COMPLAINT 22 ) 23 ) 24 ) 25 26 27 28 CONSOLIDATED AMENDED CLASS ACTION COMPLAINT CASE NO. 5:14- CV-05204-EJD Case 5:14-cv-05204-EJD Document 72 Filed 06/29/15 Page 2 of 84 1 TABLE OF CONTENTS 2 I. NATURE OF THE ACTION .......................................................................................... 1 3 II. JURISDICTION AND VENUE ...................................................................................... 8 4 III. PARTIES ........................................................................................................................ 5 6 IV. CONTROL PERSON ALLEGATIONS ........................................................................ 11 7 V. SUBSTANTIVE ALLEGATIONS ............................................................................... 1 8 A. The Company And Its Business ......................................................................... 1 9 B. FireEye Acquires Mandiant and Touts an Integrated Product Solution Featuring Mandiant’s Endpoint Threat Detection ............................................... 1 10 C. Defendants Conceal Significant Problems With Mandiant’s Flagship MIR 11 Product.............................................................................................................. 2 12 D. Defendants Update Market on “Smooth” and “Rapid” Mandiant 13 Integration......................................................................................................... 2 14 E. Defendants Sell Millions in Stock Following FireEye’s Secondary Offering............................................................................................................. 2 15 F. FireEye Misses Consensus Product Revenue in 1Q14 ........................................ 2 16 G. In Reality, Integration Problems, Channel Friction, And Competition 17 Adversely Impact Product Sales ........................................................................ 2 18 1. Integration Problems Cause Delays in Sales Cycles................................ 2 19 2. Integrating Sale of Mandiant Services Causes Channel Friction ............. 3 20 3. Increasing Competition Reduces The Pipeline ........................................ 3 21 H. FireEye Announces A Change in Revenue Recognition For Its Email 22 Product And Appoints a New Head of Sales ...................................................... 3 23 I. FireEye Introduces FireEye-as-a-Service, A New Subscription Service ............. 3 24 VI. DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS 25 ANDOMISSIONS ....................................................................................................... 4 26 A. Class Period Financials ...................................................................................... 27 B. January 2, 2014 8-K Attaching Press Release Announcing Mandiant Acquisition........................................................................................................ 41 28 CONSOLIDATED AMENDED CLASS ACTION COMPLAINT i CASE NO. 5:14- CV-05204-EJD Case 5:14-cv-05204-EJD Document 72 Filed 06/29/15 Page 3 of 84 1 C. January 2, 2014 Call Announcing Mandiant Acquisition ................................... 4 2 D. February 11, 2014 4Q13 Earnings Call .............................................................. 4 3 E. May 6, 2014 1Q14 Earnings Call ....................................................................... 4 4 F. May 20, 2014 JP Morgan Global Technology Media Telecom Conference ........ 5 5 G. May 29, 2014 Cowen Technology Media & Telecom Conference ..................... 5 6 H. June 3, 2014 Bank of America Merrill Lynch Global Technology 7 Conference........................................................................................................ 5 8 I. August 5, 2014 2Q14 Earnings Call ................................................................... 9 J. August 11, 2014 Pacific Crest Global Technology Leadership Forum................ 10 K. September 3, 2014 Citi Global Technology Conference ..................................... 11 L. September 18, 2014 FireEye Tech Talk ............................................................. 12 VII. THE ENTIRE TRUTH IS FINALLY REVEALED ...................................................... 13 VIII. ADDITIONAL SCIENTER ALLEGATIONS .............................................................. 14 IX. CLASS ACTION ALLEGATIONS .............................................................................. 15 X. APPLICABILITY OF PRESUMPTION OF RELIANCE UNDER THE 16 AFFILIATED UTE DOCTRINE, AND/OR, IN THE ALTERNATIVE, THE FRAUD ON THE MARKET DOCTRINE .................................................................... 6 17 XI. NO SAFE HARBOR .................................................................................................... 18 XII. LOSS CAUSATION/ECONOMIC LOSS ..................................................................... 19 20 COUNT I Violation Of Section 10(b) Of The Exchange Act And Rule 10b-5(b) Promulgated Thereunder Against All Defendants .......................................................... 7 21 COUNT II Violation Of Section 10(b) Of The Exchange Act And Rule 10b-5(a) and (c) 22 Promulgated Thereunder Against All Defendants .......................................................... 7 23 COUNT III Violation Of Section 20(a) Of The Exchange Act Against the Individual Defendants.................................................................................................................... 7 24 JURY TRIAL DEMANDED .................................................................................................... 25 26 27 28 OLIDATED AMENDED CLASS ACTION COMPLAINT ii NO. 5:14- CV-05204-EJD Case 5:14-cv-05204-EJD Document 72 Filed 06/29/15 Page 4 of 84 1 Lead Plaintiffs State-Boston Retirement System (“State-Boston”) and Vijay Fadia 2 (“Fadia”) (collectively, “Plaintiffs”), by their undersigned attorneys, hereby bring thi 3 Consolidated Amended Class Action Complaint (the “Complaint”) against FireEye, Inc 4 (“FireEye” or the “Company”), David G. DeWalt (“DeWalt”), Michael J. Sheridan (“Sheridan”) 5 and Kevin Mandia (“Mandia”). The allegations herein are based on Plaintiffs’ persona 6 knowledge as to their own acts and on information and belief as to all other matters, such 7 information and belief having been informed by the investigation conducted by and under the 8 supervision of their counsel, which included interviews of former employees of FireEye and 9 other persons with knowledge of the matters alleged herein; these confidential witnesse 10 (“CWs”) will be identified herein by number (CW1, CW2, etc.), 1 and review and analysis o 11 publicly available information, including United States Securities and Exchange Commission 12 (“SEC”) filings by FireEye, as well as regulatory filings and reports, securities analysts’ report 13 and advisories about the Company, press releases and other public statements issued by the 14 Company, and media reports about the Company. Plaintiffs believe that substantial additiona 15 evidentiary support will exist for the allegations set forth herein after a reasonable opportunity 16 for discovery. On behalf of themselves and the class they seek to represent, Plaintiffs allege a 17 follows: 18 I. NATURE OF THE ACTION 19 1. This action is brought on behalf of a class of purchasers of FireEye 20 between January 2, 2014 and November 4, 2014 inclusive (the purchasers being the “Class” a 21 the time frame being the “Class Period”). Plaintiffs seek remedies under the Securities Exchan 22 Act of 1934, 15 U.S.C. §§ 78a et seq. (the “Exchange Act”). 23 2. FireEye, founded in 2004, develops and markets products and services related 24 network security, including the real-time detection of and protection from threats from t 25 internet, through email, and from other sources. FireEye’s systems claim to offer protectio 26 superior to those of traditional products that rely on matching data with an existing database 27 28 1 All CWs will be described in the masculine to protect their identities. CONSOLIDATED AMENDED CLASS ACTION COMPLAINT 1 CASE NO. 5:14- CV-05204-EJD Case 5:14-cv-05204-EJD Document 72 Filed 06/29/15 Page 5 of 84 1 previously identified programs, or “signatures.” The Company purports to be an industry leade 2 in protecting networks against advanced persistent threats (APTs), particularly unknown 3 previously undetected threats known as “zero day” threats, using quarantining or “sandboxing 4 to detect novel malware that signature-based technologies are unable to detect. The “sandbox” i 5 an emulation environment