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

To: Edwarda who wrote (4432)	3/21/1999 4:45:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 6021

Edwarda, maybe we need to think somewhat more strategically about NETA. By that I mean the direction of the company over the next 3-5 years. Currently the fear seems to be that the quarter will be somewhat light. But this fear raises a couple of important questions. The first is whether NETA's products are entering a mature phase of their product life cycles. While much of the blame on enterprise revenue growth has been centered on Y2K remediation, I would think that network security would be fairly immune to budget redirection. Assuming that NETA's products are entering a secular slow-down phase the company must seek avenues for expansion. But one of the major raps against NETA is that their aggressive expansion has lead to a situation where it is difficult to analyze exactly what the cash generating ability of the company may be. Irrespective of SEC rules regarding the accounting for restructuring expenses, there are very real cash costs associated with the various acquisitions, and it is difficult for me at least to sort them out at this point. I am not talking about acquired R&D (which, in my opinion should never have been considered as a proper one time expense against earnings). I am talking about employee relocation, termination and associated expenses. In other words, we still haven't seen what the company will look like when all the dust has settled. But if the fear that the company is approaching a secular slow-down is correct, then it has little choice but to expand. Mrknowitall and others have painted a fairly compelling picture of a company eviscerated of the organs it needs to grow into new niches. That implies the necessity for growth through acquisition, and that will create additional dust. But there are two very good reasons why NETA cannot expand through acquisition (at least in the short run): 1. The extremely low price of NETA shares preclude using stock as a currency; and 2. The murky picture surrounding NETA's financial situation will likely force too high an interest rate for borrowed money. But I see another possibility that I think should be thought about very seriously at this juncture. Perhaps NETA is itself a desirable target for a takeover. And before somebody points out that Larson would never go for it I would hasten to point out that the only way a takeover would make sense would be if Larson left. So his acquiescence is not part of the calculus. But now comes the difficult question: what company would be potentially interested in NETA? I will simply throw out two possibilities: CSCO and IBM. Your thoughts on any of the foregoing? TTFN, CTC