http://www.nytimes.com/reuters/technology/tech-tech-mcafee-networkassociates.html?dlbk=&pagewanted=print&position=top
April 25, 2002 Network Associates Drops McAfee Bid, Stocks Hit By REUTERS Filed at 7:49 p.m. ET NEW YORK (Reuters) - Computer security provider Network Associates Inc. (NET.N) on Thursday withdrew its offer to buy McAfee.com Corp. (MCAF.O) after it found accounting errors that could force it to restate financial results for 1999 and 2000. The news sent both companies' shares reeling. McAfee.com tumbled more than 24 percent, or $4.57, to close at $13.97 on the Nasdaq, where the stock was among the top percentage and net loss leaders. Network Associates lost 20 percent, or $4.86, to close at $18.89 on the New York Stock Exchange, where the stock was among the most active and biggest net losers. Network Associates, whose accounting practices are under investigation by the U.S. Securities and Exchange Commission, said it does not have a ``complete understanding'' of the facts yet and it is conducting an internal investigation to determine the scope and magnitude of the problems. Still, the company said it does not believe its 2001 results or 2002 guidance will require restatement. ``We're hopeful that it is limited to 1999 and 2000, although there are still no absolute assurances that it's not crept into other periods,'' Sterling Auty, an analyst with J.P Morgan said. He downgraded Network Associates stock to ''market-performer'' from ``buy'' when the SEC probe was unveiled, he noted. The accounting problems, which were spotted during the preparation of a ``routine'' amended tax filing, are likely to affect both revenue and expense figures, Network Associates officials said during a conference call. McAfee.com Chief Executive Srivats Sampath said the withdrawal of Network Associates' offer would not have any effect McAfee's day-to-day operations. ``What does it mean to us? In a nutshell, nothing,'' Sampath said on a conference call with analysts. The CEO also stressed that Network Associates' accounting problems would not have any effect on McAfee's own financial statements or guidance. ``It will have no effect whatsoever. We have separate accountants, separate books and separate outside counsel ... for all practical purposes we're a completely separate company,'' he told Reuters. WITHDRAWS OFFER Network Associates said its findings are unrelated to the SEC investigation. It said it told SEC staff about the probe and that it would report further findings in two to three weeks. It added that the inaccuracies appear only to affect the Network Associates side of the business, not McAfee, in which Network Associates owns a 75 percent stake after spinning the company off about 3 years ago. Network Associates, whose software guards against hackers and viruses, said it withdrew its offer for the anti-virus services company McAfee.com because it felt that McAfee shareholders needed complete information before tendering their shares. The offer was due to expire on Thursday. ``We have to withdraw the offer at this point because it's a stock-for-stock transaction,'' Samenuk said. ``The McAfee offer is done right now. Done.'' SWEETENED BID Earlier this month, McAfee.com accepted a sweetened bid of $224 million from Network Associates for the 25 percent stake of McAfee it does not already own. The offer would have given McAfee shareholders 0.78 of a share of Network Associates common stock for each outstanding Class A McAfee share. Asked if he would consider another offer from Network Associates, Sampath said he wouldn't rule it out but that he would only contemplate a deal once Network Associates had fully resolved its accounting problems. ``If they come back in two weeks I would be mildly irritated,'' he said. ``They need to go and get their act together ... and then let's come back and take a look at this.'' About one week after McAfee.com accepted the revised offer from Network Associates, Sampath filed documents with the U.S. Securities and Exchange Commission saying he planned to sell 200,000 common shares he owns in McAfee.com. The filing was released on Thursday. Network Associates, which competes with Symantec Corp. (SYMC.O), has been reorganizing its operations since Samenuk and Chief Financial Officer Steve Richards came on board in early 2001. Network Associates has said the ongoing SEC probe is focused on the company's practice in 2000 of booking revenues when products were shipped to distributors instead of when customers bought the products. Kevin Wagner, an analyst with Adams, Harkness & Hill Inc., questioned why the problems were only coming to light now instead of last year after Samenuk and Richards arrived to clean up shop. ``They should have looked at this a bit more closely when they first came in,'' Wagner said. ``Why not sweep out all the cobwebs?'' -- ----------------- R. A. Hettinga <mailto: [EMAIL PROTECTED]> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' --------------------------------------------------------------------- The Cryptography Mailing List Unsubscribe by sending "unsubscribe cryptography" to [EMAIL PROTECTED]
