Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Charlie Smith who wrote (4171)	2/4/1999 6:19:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 6021

Charlie, I absolutely agree with you, but there are important differences between NETA on the one hand, and OXHP and CD on the other. I don't think anybody is accusing NETA of "fudging" the numbers. The SEC wants to retroactively change the accounting for pooling of interest mergers (a position with which I agree). My problem is with the rules by which those numbers were generated. The result is that I am having trouble figuring out just where NETA is. OXHP had a different problem. It was installing a new computer system, and ignored a bunch of payables that were clearly there. The tipoff for me came when, during the summer 1977 quarter it reported a hefty gain in "earnings" but was in negative cash flow. That has to be a tipoff that something is wrong! CD out and out manipulated numbers. It used bogus revenue and misapplied accounting standards so that it ended up capitalizing marketing and advertising expenses. It took financial detective work to ferret that one out. TTFN, CTC

To: Charlie Smith who wrote (4171)	2/5/1999 5:36:00 PM
From: The Rancher	Read Replies (3) \| Respond to of 6021

Pardon...let me back up a minute. I am assuming that most of the people on this board are not institutional investors and don't have access to the resources that are required in a detailed analysis of the numbers (and thus gave the advice to look at the strategy). But since that assumption was apparently WRONG, I will be happy to engage in a discussion of the numbers: I'll start off by prefacing that if you don't believe NETA's auditors for the last three years on accounting issues (excluding the recent in-process R&D controversies spawned by the SEC) and believe they are cooking the books, then you shouldn't be investing in any company that uses those same auditors (Coopers). Now... 1) I think the cash flow question has been addressed in prior posts. Cash flow from operations in the fourth quarter was again positive. Management did not state a value. 2) Deferred revenue again increased in Q4. No issues. 3) Cash balance was up (again)in Q4 by $70 million. DSOs were in-line. Collection cycles look pretty good. 4) The Sniffer business was $95 million in the 4th quarter vs. $69 million in Q4 of 1997. That's 38% growth from a business people thought would only grow 15-20%. I might also add that they have converted the sales model to channel-driven, giving higher margins and better profitability. That's my answer to "what was the value of the NETG deal?" Same deal with subsequent acquisitions. 5) Acquisition-related charges: from what I hear, investors (that's right, INSTITUTIONS) are going to start looking at numbers excluding in-process R&D charges. Take a look at how YHOO, AOL and some others are being analyzed. Even if this doesn't pan out, NETA has enough control of its sales accounts that it can use OPERATIONAL efficiencies, not accounting tricks, to make up the difference. 6) Over 50% market share in anti-virus, over 50% share in helpdesk, 190% growth in the security space, and sniffer is fine as previously mentioned. Penetration remains relatively low, providing a lot of opportunity in the installed base. At the expense of writing a novel, I'll stop. However, I know that you can still come up with a dozen other financial concerns that I will be happy to address. -ranch