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January 17, 2000

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Network Associates' Plan: Divide And Conquer
Security vendor will split into several independent units to keep pace with Net startups

By Matthew G. Nelson

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    T he Internet is continuing to change business-and businesses, too. The latest example: Network Associates Inc., the world's largest security software company, this week will reveal plans to split into several independent companies in order to be as responsive and flexible as nimble Internet startups. The company says the new business groups will be able to foster closer relationships with customers. The reorganization could also make it easier for Network Associates to offer greater financial opportunities to better attract and retain quality technical personnel.

    Network Associates will act as a holding company for the new units, which will include four software development organizations drawn from the company's existing divisions. PGP Security, Sniffer Technologies, McAfee, and Magic Solutions provide network security, security assessment, antivirus, and help-desk products, respectively. Each will continue to be owned by Network Associates, but will have its own CEO or president and greater autonomy over its operations.

    McAfee.com Corp., a public company created by Network Associates in 1999 to provide antivirus services for consumers over the Internet, and MyCIO. com, a new private entity Network Associates will launch this week at the RSA Data Security show, will also operate under the auspices of the holding company. MyCIO.com will offer remote hosting and management of security applications to midsize businesses.

    Taking the reins as president of the holding company is Peter Watkins, former executive VP at the software vendor. He says the new units have the potential to grow aggressively in their areas because they'll be able to focus exclusively on meeting their users' needs. "When you're a platoon on the battlefield you can move a lot faster than the whole battalion," he says.

    Some users say they'll benefit from the change. "We're seeing a normal maturation process; in the early stages they had to be jacks-of-all-trades, masters of none," says Tim Opelt, a senior manager of information systems and technologies at supply-chain vendor i2 Technologies Inc., which uses most of Network Associates' product suite. "This will probably give them a more-focused opportunity to concentrate on the individual product lines."

    Analysts say more companies may follow the same path as Network Associates. "How can you, as an established company, compete with all the startups with no legacy?" says Judith Hurwitz, president of the Hurwitz Group. "Existing companies with good value and name recognition can help themselves jump-start more aggressively into new markets by acting like startups."

    There's no plan yet to offer stock in the new companies, says chairman and CEO Bill Larson, but that may change. "They have to perform, it has to make sense for the customers, then it has to make sense for Network Associates' shareholders," he says.

    Observers say issuing stock can be a considerable advantage for companies that don't want to lose talented employees to Internet startups that promise them the chance to strike it rich on an initial public offering. This type of reorganization, Hurwitz says, also enables "employees to have more control and accountability to drive their own destiny," and that's often key to retaining personnel.


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