Network Associates posts gain despite flat sales

SEATTLE: Security software maker Network Associates Inc. posted a profit after a year-earlier loss on increased consumer demand for anti-virus software, although sales remained flat.

Net income for the fourth quarter was $41.3 million, or 24 cents a share, compared with a net loss of $11.2 million, or 7 cents a share, in the year-ago quarter.

Revenue was $269 million, down slightly from $270 million a year ago, the Santa Clara, California-based company said.

As corporate customers switched from high-end network analysis products to lower-priced offerings, consumers helped boost the company's McAfee anti-virus software business during the quarter.

Excluding interest expenses, stock-based compensation, amortization and other charges, Network Associates said it had a profit of $47 million, or 26 cents per share, compared with analysts' outlook for a profit of 21 cents, according to the average of forecasts compiled by Reuters Research, a unit of Reuters Group Plc.

Analysts on average had forecast fourth-quarter revenue of $257 million.

"Our consumer anti-virus business continues to outperform our expectations, growing 43 percent year-over-year," Network Associates Chief Executive, George Samenuk told analysts on a conference call.

Network Associates said it added 642,000 new subscribers to its online anti-virus offering, bringing the total to 3.7 million.

VIRUS ATTACKS AGAIN

Samenuk said this week's emergence of the MyDoom, the latest worm to infect computers over the Internet, was also likely to contribute to demand for anti-virus software and services in the current quarter.

Computer security companies, including Network Associates' biggest competitor Symantec Corp., have reported a pickup in consumer demand for their products after last summer's attacks by the Blaster worm and SoBig virus.

"Certainly in a security segment, Symantec's results and others' results and our results say that security spending is going to go up and continues to go up from the events of last summer," Samenuk said.

MyDoom, also known as Novarg or Shimgapi, is activated when unsuspecting recipients of an e-mail message open a file attachment that releases a virus.

For the current first quarter, Network Associates said it expects revenue of $208 million to $212 million, with minimal impact from the sales of its Magic solutions business.

Earnings excluding charges were projected to be 10 cents per share at the middle of that revenue range.

But the outlook came in below analysts expectations, partly due to reduced expectations for Network Associates' network intrusion detection product, called Sniffer.

"We have reigned in our revenue expectations for Sniffer following the disappointment in 2003," Samenuk said.

Analysts on average are expecting first-quarter earnings excluding charges of 12 cents on revenue of $223.6 million.

Network Associates reported 2003 earnings of $67 million, or 40 cents a share, on revenue of $933 million.

The company projected 2004 earnings of 67 cents to 72 cents per share, excluding charges, on revenue between $915 million and $945 million.

Shares of Network Associates rose slightly in after-hours trade to $16.36 from their New York Stock Exchange close of $16.11.

(C) Reuters