Network Associates Posts Loss, Cuts 2003 Outlook

The security-products vendor blames lower customer spending and the war in Iraq for the $3.7 million loss.
Network Associates Inc. on Thursday reported a loss for the first quarter of 2003 and cut its financial outlook for the year. George Samenuk, CEO of the security-products vendor, cites a steep pullback in customer spending as a result of tight economic conditions and uncertainty about the war in Iraq as the reason for the loss.

For the first quarter of 2003, ended March 31, Network Associates reported a loss of $3.7 million, compared with a profit of $15.8 million for the same period last year. Overall revenue fell to $215.2 million, from $220.7 million a year earlier.

Network Associates expects earnings to fall to between $215 million to $220 million for the second quarter. For the fiscal year, the company says it expects revenue between $930 million and $950 million.

"Economic conditions deteriorated rapidly toward the end of the quarter," Samenuk said during a conference call with analysts, adding that many large deals were cut in size, and full deployments were even postponed by customers who got skittish about the economic outlook at the end of March. It's common for software companies to close more than half of expected sales at the end of the month.

"These are not normal times. Over the last several weeks, I have meet with many CEOs and CIOs who have slashed IT budgets across the board," Samenuk said.

Network Associates still isn't able to report its annual 2002 financial statement as a result of two previously announced federal investigations for the years 1998 through 2000. The company said last month that it's restating its results for those years.

The financial woes didn't stop Network Associates from conducting a recent buying spree. In the first week of April, the company bought IntruVert Networks, a maker of network intrusion-prevention firewalls, for $100 million, and acquired Entercept Security Technologies for $120 million. Entercept makes host-based intrusion-prevention software to protect servers.

Said Samenuk, "We're going to move the industry standard from intrusion detection to intrusion protection."