Network Associates Sells Sniffer

Network Associates outlines business, productivity, and branding changes; will sell Sniffer product line, rename company to McAfee

April 23, 2004

5 Min Read

SANTA CLARA, Calif. -- Network Associates, Inc. (NYSE: NET - News), a leader in intrusion prevention solutions, today outlined its strategy to streamline its business and focus solely on security products and services. Several key changes were announced today including:

  • The Sniffer product line will be sold to Silver Lake Partners and Texas Pacific Group for $275 million in cash, subject to working capital adjustment.

  • Network Associates will change its name to McAfee, Inc. upon completion of the transaction.

  • The company announced a cost reduction and profitability plan, which has been under development for several months and is designed to deliver a 25 percent operating margin by mid-year 2005.

  • Preliminary, first quarter net revenue is expected to be $217 million, with GAAP net earnings and pro forma net earnings expected to be $0.32 per share -- diluted -- and $0.10 per share -- diluted, respectively.

  • The new McAfee, Inc. -- which consists of the enterprise anti-virus and intrusion prevention security businesses, the McAfee Labs research organization, and the consumer security business -- grew 11 percent year over year in revenue, while bookings grew 32 percent year over year.

  • The McAfee online consumer business maintained strong momentum in the first quarter signing up 860,000 net new subscribers. "This company is engaged in the most aggressive and important transformation in its history," said George Samenuk, chairman and CEO of Network Associates. "Today's announcements demonstrate our commitment to increase shareholder value by streamlining our business and accelerating profit and growth. These changes will transform us into a more powerful, more profitable, and more competitive company for the future."

Silver Lake Partners and Texas Pacific Group to Acquire Sniffer Assets for $275 Million

Silver Lake Partners and Texas Pacific Group, two of the world's leading private equity firms, plan to acquire the Sniffer assets for $275 million in cash, subject to working capital adjustment. The acquirers intend to form a stand-alone entity named Network General Corporation which will continue to develop, support, sell and market the Sniffer branded products. The new Network General Corporation will focus exclusively on network and application performance solutions and will provide strong continuity by building upon the Sniffer employee base and management team.

Based on the terms of the agreement, the network management technologies and assets associated with the Sniffer business unit will be part of the new company. Both organizations are committed to working together to ensure a seamless transition for all customers, partners and employees. Closing of the transaction is subject to customary conditions, including Hart-Scott-Rodino anti-trust clearance, and is expected in the third quarter.

"We will work with Network General to ensure our customers go through this change with as little impact as possible," continued Samenuk. "Network General and McAfee will continue to partner for years to come in support of these customers."

"We are confident that this transaction will benefit Sniffer customers, employees and business partners alike," said Smets. "The new Network General will be an organization focused wholly on best-of-breed network and application performance solutions."

After the transaction closes Network General Corporation will continue to develop and support all Sniffer products. Investments will continue to ensure a steady flow of new products such as the recent Netasyst D/DX product, which was announced earlier this month and will ship in June.

Silver Lake Partners and Texas Pacific Group, who will be equal partners in the transaction, have worked together successfully in the past and have substantial experience in large scale private equity investing in the technology arena.

The transaction will move $200 million off of the Network Associates' revenue line faster than the company will be able to take out Sniffer's general and administrative expenses and other infrastructure costs. The transaction will be dilutive to Network Associates in 2004.

Network Associates to Change Name to McAfee, Inc.

Reinforcing its image as a leader in security and intrusion prevention, Network Associates will change its name to McAfee, Inc, reflecting a brand that carries awareness and confidence among corporate and consumer customers around the world. The McAfee name and McAfee products have long been associated with best-in-class security solutions. The McAfee Protection-In-Depth strategy allows organizations to optimize business availability with pro-active security solutions that protect against known and unknown threats.

The new McAfee, Inc. will leverage its brand recognition and aggressively focus on several key markets including strategic partnerships with service providers and industry-leading technology companies as well as the growing consumer and SMB markets where brand recognition is an important element in purchasing decisions. The simplification of several pricing structures and business operations has brought Network Associates growth in its consumer and SMB business over the last several months.

New Cost Reduction and Profitability Plan Establishes Aggressive Programs and Expense Goals

Network Associates gave details today about its plan to reduce costs and increase profitability, a program that has been under development for several months. The program addresses several key areas across the company, with the goal of hitting a 25% operating margin by mid-year 2005.

The company is taking several steps to hit this goal, for example, fundamentally redesigning internal back office systems, strategically modifying product designs, and modifying web services to the company's reseller and distribution partners, among other initiatives.

Network Associates Inc.

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