Network Associates Q1 net profit $56m

By Spencer Swartz

SAN FRANCISCO: Security software maker Network Associates Inc. has posted a higher quarterly profit but offered a current-quarter sales forecast about 10 percent lower than Wall Street expectations.

Santa Clara, California-based Network Associates also said it would take a still-undetermined charge related to its previously announced decision to sell a network management unit, and its shares fell about 5 percent in after-hours trade.

Network Associates reported first-quarter net income of $56 million, or 32 cents per share, citing strong sales for its McAfee anti-virus product. The results compared with a restated profit of $12 million, or 8 cents per share, a year earlier.

Revenue for the quarter ending March 31 was $217 million from a restated $219 million a year earlier.

Excluding items like interest expense on convertible debt, amortization and restructuring costs, earnings were $18 million, or 10 cents per share.

On that basis, analysts had expected earnings per share of 11 cents on revenue of $214.1 million, according to Reuters Research, a unit of Reuters Group Plc.

Network Associates forecast current quarter revenue of $200 million to $205 million, well below analyst consensus forecasts of around $220 million to $224 million.

The company said its second-quarter revenue would be hit by the sale of its Sniffer Technologies business, a deal expected to close in the third-quarter.

On a conference call with analysts, company executives did not detail how the pending sale of the unit would lower sales.

Network Associates announced last week that it would sell Sniffer Technologies for $275 million in cash to Silver Lake Partners and Texas Pacific Group as it concentrates on its anti-virus products.

ASSET SALE

"This is why the (revenue) numbers are coming down," said Joel Fishbein, an analyst at Janney Montgomery Scott, LLC, which does not have a banking relationship with Network Associates.

"I think there's also some confusion as to why guidance was brought down the way it was as a result of the Sniffer sale," said Fishbein, who does not own any Network Associates stock. Fishbein said he was not sure whether he would keep his current "buy" rating on Network Associates.

Sniffer, which was bought by Network Associates in 1997, provides products that help companies manage their network infrastructure. Network Associates would not discuss what charges it may take on the asset disposal and said it would update analysts on June 3rd when it updates its full-year outlook.

© Reuters