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Technology Stocks : Network Associates (NET)

NET 184.09

0.0%

Jan 16 3:59 PM EST

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To: Chuzzlewit who wrote (3109)	8/21/1998 6:04:00 PM
From: deeno	Read Replies (1) of 6021

This might be the report on the earnings change Merrill Report Price: $47 7/8 12 Month Price Objective: $65 Estimates (Dec) 1997A 1998E 1999E EPS: $1.04 $1.50 $2.13 P/E: 46.0x 31.9x 22.5x EPS Change (YoY): 44.2% 42.0% Q3 EPS (Sep): $0.27 $0.38 Cash Flow/Share: $1.25 $1.62 $2.53 Price/Cash Flow: 38.3x 29.6x 18.9x Dividend Rate: Nil Nil Nil Dividend Yield: Nil Nil Nil Opinion & Financial Data Investment Opinion: D-1-1-9 Mkt. Value / Shares Outstanding (mn): $6,898.8 / 144.1 Book Value/Share (Jun-98): $2.85 Price/Book Ratio: 16.8x LT Liability % of Capital: 45.7% Est. 5 Year EPS Growth: 30.0% Stock Data 52-Week Range: $56 7/8-$27 7/16 Symbol / Exchange: NETA / OTC Options: Chicago Institutional Ownership-Spectrum: 70.9% ML Industry Weightings & Ratings** Strategy; Weighting Rel. to Mkt.: Income: Underweight (07-Mar-95) Growth: Overweight (07-Mar-95) Income & Growth: Overweight (07-Mar-95) Capital Appreciation: Overweight (28-May-93) Market Analysis; Technical Rating: Average (27-May-97) Intermediate term opinion last changed on 21-Apr-98. The views expressed are those of the macro department and do not necessarily coincide with those of the Fundamental analyst. For full investment opinion definitions, see footnotes. Investment Highlights: ú Recent lift to NETA as Dr. Solomon's deal closes, arbs cover short positions and 1999 estimates move up modestly. ú Expect company to increase communication with Street now that deal is closed, especially at Fall investor conferences. ú We have adjusted estimates to reflect SOLLY merger closing last week. 1999 EPS receive modest bump up due to accretion. ú NETA trades at 22.5x 1999 EPS for 42% earnings growth. Upper 20s P/E on 1999 EPS 12 months out $65 objective (+35%). Fundamental Highlights: ú Dr. Solomon's deal closed Aug. 13. New estimates reflect combined entity. ú As expected, $0.03 dilution in 3Q 98, EPS neutral in 4Q 98. Additive to 1999 EPS. ú Company will see some tax benefits in Europe as result of merger. Will plow savings back into operating line to invest in future growth. ú Management indicated that core business feels "real good" at this point in 3Q 98. ú Caveat: expect NETA's A/R DSOs to move into low 80s as SOLLY's DSO's above 100. Bulletin United States Information Processing - Enterprise Software 19 August 1998 Christopher C. Shilakes First Vice President Network Associates, Inc. Estimates Adjusted for Dr. Solomon's Deal BUY Long Term BUY Reason for Report: Estimate Changes Merrill Lynch & Co. Global Securities Research & Economics Group Global Fundamental Equity Research Department RC#10123136

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