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Technology Stocks : Network Associates (NET) -- Ignore unavailable to you. Want to Upgrade?

To: lofalutin who wrote (5426)	6/30/1999 7:43:00 PM
From: Chuzzlewit	Read Replies (3) \| Respond to of 6021

Stephen, there are many on this board who are in a better position to analyze the specific problems faced by NETA, but for what it's worth, here is my general take. NETA is a company that may (or may not, depending on which posters you believe) be well positioned to take advantage of the tremendous growth opportunities afforded by the network security area. Some posters have claimed that management has gutted NETA's R&D for the sake of quick profits. Unfortunately, management has engaged in a series of acquisitions that, while strategically sound, made little financial sense. Simply put, the price paid was much too high. The acquisition of Network General is a prime example. As a result of the SEC inquiry into the company's accounting treatment of these acquisitions, earnings forecasts have been revised downward because the SEC disallowed the ubiquitous one time charge for purchased R&D and instead required the company to amortize these costs as goodwill. In addition, there appears to me to have been an over-aggressive booking of sales which resulted in stuffing the channels, resulting in cash flow considerably less than had been forecast. Third, management has claimed that larger deal sizes have slowed the time it takes to get deals consummated. I don't buy this at all. I think that there is a credibility problem with customers that the company must overcome. Fourth, there has been a tendency on the part of management to claim that Y2K lockdowns have resulted in less than anticipated deals in the pipeline. I think that this, too, is a red herring. My personal take is that the management is getting a dose of reality. I think that it is now learning that smoke and mirrors won't fool investors over the long run. And I also think that Larson is a smoke and mirrors artist. So, in sum, I think that NETA offers a great deal of potential to the investor willing to accept a high level of risk. Unfortunately, I have little faith in Bill Larson to lead this company through the transition required to establish credibility with the street. If you read Dickens I think that the character Chevy Slyme may come to mind when thinking about characterizing some of NETA's upper level managers. TTFN, CTC