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

To: mrknowitall who wrote (5228)	4/30/1999 5:42:00 PM
From: AlienTech	Read Replies (1) \| Respond to of 6021

<<If you could post your notes, I'd be very thankful. >> ~~~~~~~~~~~~~ OK, but only under the understanding that I easily could have misheard things, so everyone is encouraged to listen to the call and form their own opinions. I make lots of mistakes!!! Anaxagoras ~~~~~~~~~~~~ General remarks: First, there were a lot of technical problems with the transmission quality of the call, unfortunately, which never helps general impressions. Second, this is the first call that I remember (I've listened to dozens and dozens) on which the moderator didn't have folks state the firm they were with- this is unfortunate since you don't easily know who's following the stock, and I'm not familiar with the analysts covering this sector. The only analyst I believe I recognized was Todd Baker of H&Q (although it didn't sound to me like his voice, so who knows). Third, my overall grade of the call was about a D. The initial presentation was little more than a reading of the Press Release and they were not at all forthcoming in the Q&A period, although a lot of questions were asked. Analysts were clearly disappointed. The tone, IMO, was certainly anything but upbeat. Their acquisition intentions have been adversely impacted by the precipitous decline in share price. Don't expect any more in the near future, they are busy digesting the PassGo acquisition. As far as a share re-purchase is concerned, this is not possible for at least the next 6 months because of a restriction imposed when a company accounts for an acquisition using pooling accounting, as AXNT did for Internet Tools. Management believes that the sharp drop shouldn't influence sales force very much because primarily commissions incentivize them, not options. Management was very stingy with information regarding their hybrid channel (indirect/direct sales). Collections are consistent, and nothing unusual. They are "confident" in their "collectability". However, DSOs are ugly. [Note for those unfamiliar with DSOs: a DSO figure, or days of sales outstanding, is calculated variously, but one way to do it that makes the concept involved clear is to take the revenues generated in a quarter and divide by 91 to find the amount of revenues generated per day- then take this number and divide it into average receivables ("sales outstanding" so-to-speak, i.e. revenues booked but yet to be collected) for the quarter.] High receivables and weak revenues together caused DSOs to bloom. Management explained that due to the PassGo acquisition AXNT acquired all of those receivables and yet, because the acquisition happened at the end of the quarter and purchase accounting was used, AXNT didn't get the benefit of using much of their revenues on their Q1 income statement. This artifact will presumably change in the next quarter. DSOs for the quarter with PassGo: 112 days. DSOs for the quarter without PassGo: 100 days. But 100 DSOs is still very high and was attributed to the fact that deals were closed late in the quarter- IMO, this is further confirmation of their problem in closing sales. For a comparison, last Q (i.e. Q4) DSOs were 75-76 days, but management explained that this figure was in fact artificially low because of early collection on several large transactions. For all of 1998 DSOs generally ran in the 85-90 day range. PassGo was chewing up about $4M a quarter in expenses, but those don't show up for Q1 on AXNT's books. Earlier in the month the revenue shortfall was attributed to the fact that 12-18 deals worth $10-$15M had slipped- these are still viable, but no details were given as to their status. Why their closure rate is so crappy here they still couldn't say. I found this to be very disturbing. "Nothing new" to be gained after their preliminary analysis mentioned in the early April call. The biggest weakness by far has been in the Systems Security Product line. Geographically speaking 70-75% of sales were in North America, the balance being in Europe and Far East. FWIW, the Far East was a bright spot consistent with the resurgence seen in Japan by other companies. AXNT opened shop there in a serious way about 6-12 months ago. As mentioned before, the Y2K impact is due to the fact that many organizations restrict the intro of new software onto critical systems in advance of Y2K. June(?) intro of Net Prowler.

To: mrknowitall who wrote (5228)	5/1/1999 11:08:00 PM
From: Floyd Stern	Read Replies (1) \| Respond to of 6021

Obviously, I am totally new to this discussion. I find myself with a moderate humber of shares, all purchased in the mid-40's. I thought it was a sound company before the various credibility problems emerged, and inventories accumulated. Can anyone give me their opinion as to what the future is for this company. Even if someone acquired them, at this share price I would be a big loser. Do I patiently hold for the long term, sell and take the loss, or buy more to dollar cost average. Anyone may feel free to voice their opinion. thanks. Floyd Lakeland, FL