Sue, From TheStreet.com, about 45 minutes ago.
Buying Back Enthusiasm
Network Associates (NETA:Nasdaq) CEO Bill Larson tried to start his presentation at the H&Q tech conference with some encouraging words after a rough first quarter by telling investors, "We're definitely evaluating a share buyback."
For investors who watched the security software company's stock price tumble from 66 1/4 at the end of 1998 to 10 1/16 last week, the news was as soothing as a spritz of Bactine on an open wound. Earlier this month, Network Associates pre-reported a first-quarter earnings shortfall, lowered its forecast for second-quarter revenue and restated past earnings.
Some even felt Larson's talk of a buyback was more vapor than Bactine. "How can they afford to buy back shares?" asked Nick Moore of money manager Jurika & Voyles. "Whose money are they going to use? His own? Because the company sure can't afford it."
Network Associates had $309 million in cash and short-term investments at the end of 1998, down from $517 million at the end of 1997, according to Market Guide. But since Network Associates predicted lower revenue in the second quarter, Moore expects the company will likely be "burning through cash" this quarter. Without much revenue, the company may be forced to cover operating expenses and debt payments with cash on hand, which would leave very little for a stock buyback, he said.
As a result, Moore called Larson's stock buyback suggestion "one of the most unrealistic statements you'll hear at this conference." |
