Wednesday July 21, 4:32 pm Eastern Time
Company Press Release
SOURCE: Network Associates, Inc.
Network Associates Reports Second Quarter Results
SANTA CLARA, Calif., July 21 /PRNewswire/ -- Network Associates (Nasdaq: NETA - news), a leading supplier of enterprise network security and management software, today announced final results for the three months ended June 30, 1999.
Revenue for the second quarter was $25,196,000. Reported net loss for the second quarter was $145,978,000 or $1.05 per share, excluding non cash interest expense, amortization expense, compensation charges related to employee stock options, and an incremental reserve to cover potential channel payment defaults. Factoring in the incremental reserve to cover potential payment defaults, net loss for the second quarter was $177,778,000 or $1.28 per share.
After giving effect to non cash interest expense, amortization expense and compensation charges related to employee stock options, net loss for the second quarter was $195,785,000 or $1.41 per share.
''Our commitment to customers is the foundation of our business operations,'' said Bill Larson, chairman, CEO and president of Network Associates. ''We remain focused on meeting their needs, delivering best of breed, integrated technologies, partnering with companies that enhance our offering and expanding our outlets to provide the highest quality technical support and professional services.''
Quarterly Highlights
Network Associates maintained its product and customer focus in the second quarter of 1999. The company garnered several awards for its best-of-breed technologies including:
* CyberCop, Five Star Rating, InfoSecurity News
* CyberCop, Scanner 2.5, Academy Award, Best General Security, Secure
Computing
* Gauntlet Firewall, honored for performance, Data Communications Lab Test
* Gauntlet Firewall for Windows NT, E3 Level Certification, UK Information
Technology Security Evaluation and Certification Scheme
* Gauntlet Firewall, Checkmark Certification, West Coast Labs
* PGP VPN and Active Security Suite, SecureSummit Award of Excellence,
Entrust® Technologies Inc.
* PGP 6.0, Academy Award, Best Encryption Solution, Secure Computing
* PGP 6.0, Special Award, Best Security Software, Secure Computing
. * VirusScan 4.0, Academy Award, Best Anti-Virus Solution, Secure
Computing
* Sniffer Pro, Five Star Rating, Secure Computing
* Sniffer Pro, top honors, LANQuest Labs
* McAfee Office, top utility program, competitive review, Federal Computer
Week
* McAfee Office, Four Stars, PC Computing.
* Nuts & Bolts Deluxe, top utility program, competitive review, Federal
Computer Week
Network Associates remains at the forefront in the increasingly prominent and mission critical war against viruses and hackers, winning several customer contracts including Worldtalk® Corporation where the company displaced Trend Micro. In the second quarter the company also introduced a Virus Risk Assessment system for ranking the relative danger posed by new viruses. Members of the company's NAI Labs organization provided public service assessments for several virus and hacker threats that occurred during the quarter including: Chernobyl, BackDoor-G, ExploreZip Internet Worm, and hacker tool Back Orifice 2000.
Network Associates advanced its anti-virus product leadership delivering a new ''email x-ray'' feature, which establishes VirusScan as the first desktop product to scan email attachments at the mailbox level, and new AutoImmune technology which enables an automated approach to virus detection and cleaning.
Network Associates announced its new PrimeSupport Services which deliver 24x7 Web-based support to customers worldwide. In addition, Network Associates announced a collaboration with IBM to offer expanded Network Associates University offerings by tapping IBM's Catapult training programs.
Network Associates continued to ride the momentum of its Active Security initiative, announcing partner relationships and new product shipments. These include PGP Enterprise Security Suite 6.5, which allows users to send strongly encrypted files to non-PGP users, and PGP Command Line Edition which secures enterprise-class e-commerce applications and batch processes. In addition, the company shipped CyberCop Sting, a new ''decoy'' server that silently traces and tracks hackers, and CyberCop Monitor, the first of a new generation of intrusion detection technology to create an ''end-node monitor'' that can detect both network-based attacks and system-level events on specific servers.
Cisco Systems joined Network Associates' roster of security partners announcing seamless interoperability between the PGP VPN client and Cisco's comprehensive family of VPN-optimized routers and firewalls. This alliance provides Cisco customers with a robust Internet Protocol Security (IPSec) compliant solution for remote access VPNs.
In addition, the R&D unit of GTE joined Network Associates, Cisco, Lucent Technologies, and Sun Microsystems in the Security Research Alliance, a premier, commercially funded, vendor-neutral organization whose members are involved in security research. Members of the group hosted their first ever Crystal Ball Symposium at the Internet Security Conference in San Jose, CA.
On the network management side of the house, Network Associates followed its launch of the new Magic Total Service Desk in Q1 with the launch of the Sniffer Total Network Visibility (TNV) suite 3.0. TNV 3.0 delivers new products for maintaining optimum network performance in today's Internet-powered businesses, enabling IT organizations to proactively manage e-commerce Web sites, Voice and Video over IP, networked business applications, and switched and high-speed networks. Top resellers including Management Communication Services, Dunn Computer Corporation and Information Systems Architects joined Network Associates announcing business relationships around the new TNV suite.
On the corporate front, Network Associates announced that industry veteran Enzo Torresi has joined the company's Board of Directors bringing with him more than 25 years of technology experience. Also this quarter, the company announced a stock repurchase program of up to $100,000,000.
McAfee.com ( mcafee.com ), comprising the web properties of Network Associates and the company's new portal for online PC security and management services, was ranked 35th and 36th most trafficked web site by Nielsen/NetRatings and Media Metrix, respectively.
The company will host a conference call today at 5:00 p.m. Eastern Daylight Time, 2:00 p.m. Pacific Daylight Time to discuss its results. Participants should call 415-537-1920, 212-346-6425, reservation number 12639575. Attendees should dial in at least 15 minutes prior to the conference call.
With headquarters in Santa Clara, California, Network Associates, Inc. is a leading supplier of enterprise network security and management software. Network Associates' Net Tools Secure and Net Tools Manager offer best-of-breed, suite-based network security and management software. Net Tools Secure and Net Tools Manager suites combine to create Net Tools, which centralizes these point solutions within an easy-to-use, integrated systems management environment. For more information, Network Associates can be reached at 408-988-3832 or on the Internet at nai.com.
NETWORK ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
Net Revenues $25,196 $249,317 $270,388 $475,410
Operating Costs & Expenses:
Cost of net revenues 23,554 49,873 58,796 93,139
Operating Expenses:
Research & development 35,781 36,883 70,912 69,140
Sales & marketing 90,730 67,348 184,411 144,182
General & administrative 54,238 30,410 76,008 49,172
Amortization of intangibles,
stock compensation charge
and acquisition-related
costs 13,696 83,302 28,835 88,948
Total operating costs
and expenses 217,999 267,816 418,962 444,581
Income/(Loss) from
operations (192,803) (18,499) (148,574) 30,829
Other Income and Expense, Net 1,898 4,151 3,472 9,847
Income/(loss) before provision
for income taxes (190,905) (14,348) (145,102) 40,676
Provision for income taxes 4,880 24,199 24,441 46,479
Net loss ($195,785) ($38,547) ($169,543) ($5,803)
Fully Diluted Loss Per Share ($1.41) ($0.29) ($1.22) ($0.04)
Fully Diluted Shares Used 138,478 131,503 138,437 131,194
NETWORK ASSOCIATES, INC.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, 1999 December 31, 1998
Assets
Cash and investments $620,161 $733,871
Accounts receivable, net 199,394 260,784
Prepaid expenses and other current assets 48,388 59,554
Fixed assets, net 56,194 54,489
Deferred taxes 118,719 104,071
Intangible and other long term assets,
net 295,635 323,952
Total Assets $1,338,491 $1,536,721
Liabilities
Accounts payable $28,339 $20,881
Accrued liabilities 198,185 210,070
Deferred taxes 12,144 13,000
Deferred revenue 145,790 192,598
Long term debt and other liabilities 381,590 377,334
Total liabilities 766,048 813,883
Stockholders' Equity
Common stock 1,390 1,371
Additional paid in capital and other 557,688 527,862
Other (12,231) (1,534)
Retained earnings 25,596 195,139
Total stockholders' equity 572,443 722,838
$1,338,491 $1,536,721
SOURCE: Network Associates, Inc.
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