Network Associates Inc. plans to sell off its Sniffer family of network management software and change its name to McAfee Inc., part of an effort to cut costs and boost profitability by focusing squarely on security products and services, the company announced Thursday.
Network Associates plans to sell the Sniffer assets for $275 million in cash to Silver Lake Partners and Texas Pacific Group. The private equity firms will turn the Sniffer business into a new, stand-alone company called Network General Corp., which will continue to develop, support and market the products, according to a statement.
The companies expect the sale to close in the third quarter, subject to regulatory approvals, at which time Network Associates will change its name to McAfee Inc. It considers McAfee to be a better known, more powerful brand than Network Associates, said George Samenuk, the company's chairman and chief executive, in a conference call with media and analysts.
Network Associates also announced that it expects to report net revenue of $217 million for its first fiscal quarter, with net earnings of $0.32 per share on the basis of GAAP (generally accepted accounting principles), or $0.10 per share on a pro forma basis. The quarter ended March 31.
Analysts were expecting pro forma earnings of $0.11 per share on revenue of $212 million, according to a consensus estimate from Thomson First Call. McAfee is due to report its first-quarter results Tuesday.
The goal of the changes is to streamline the company around security products and boost operating margins to 25 percent by mid-2005, Samenuk said. To achieve that goal, Network Associates is also rearchitecting its backend systems and revamping its channel program, he said.
The Sniffer products, which are used by businesses to manage the performance of networks and applications, had not been meeting targets for profit and growth, Samenuk said. They are the company's last remaining products not related to security, after it sold its Magic line of help desk and management products to BMC Software Inc. late last year.
"It's our goal to minimize as much as possible the transition issues faced by our Sniffer customers. Most of the large McAfee customers are also Sniffer customers, so we want (the new company) to be wildly successful," Samenuk said.
The Sniffer group employed between 450 and 500 people, or 15 percent of Network Associates' workforce, and the majority will become part of Network General, Samenuk said. The change will reduce Network Associates' revenue by about $200 million this year, he said.
"The strategic steps we are taking now will create a company that is well positioned to capitalize on the high demand in the security business," he said.
The name change brings Network Associates full circle. Once upon a time it was called McAfee Associates Inc. In 1997 McAfee Associates merged with Network General Corp. -- the name being given to the new Sniffer business -- and the new company became Network Associates Inc.
Ahead of the news, shares in Network Associates (NET) on the New York Stock Exchange closed at $19.75, up almost 3 percent on the day.