Network Associates Reports First Quarter Revenue of $170.3 Million, on Track With 180 Day Objectives

New Management Team Extended in the United States and Asia Pacific



Apr 19, 2001, 01:00 ET from Network Associates, Inc.

    SANTA CLARA, Calif., April 19 /PRNewswire/ --
 Network Associates, Inc. (Nasdaq: NETA) today announced that for the first
 quarter ended March 31, 2001, consolidated net revenue was $170.3 million.
 Excluding McAfee.com, Network Associates reported first quarter net revenue of
 $157.5 million. The pro forma net loss for the period, excluding McAfee.com
 and non-cash interest expense, amortization expense, and compensation charges
 related to employee stock options, was $24.3 million, or a loss of $0.17 per
 share.
     The company ended the quarter with cash and marketable securities totaling
 $636.5 million.  The reduction in cash and marketable securities relates to a
 $54 million settlement of all outstanding put options and a $6 million decline
 in the value of public equity investments.
     "We are on track with our 180-day plan," said George Samenuk, chairman,
 president and chief executive officer of Network Associates. "We have focused
 the team, throughout the business units and around the globe, towards the same
 common objectives-customer satisfaction, sales execution, increased
 efficiency, profitability and focused product development.  I'm very
 enthusiastic about the progress I've seen over the last three months and look
 forward to further change throughout 2001."
 
     Financial Highlights
     For the first quarter ended March 31, 2001, Network Associates reported
 consolidated net revenue of $170.3 million.  On a consolidated basis, and
 taking into account non-cash interest expense, amortization expense, and
 compensation charges related to employee stock options, the first quarter net
 loss was $47.4 million, or a loss of $0.35 per share.
 
      Operating Highlights
 
     Regarding the company:
     -- Network Associates announced key appointments to the executive staff in
 the first quarter, including Stephen C. Richards as its new chief financial
 officer.  Richards, a 23 year industry veteran, has an extensive Wall Street
 background and most recently held several senior executive positions with
 E*Trade Group, Inc., including chief financial officer, senior vice president
 for strategic development, and senior vice president for electronic trading
 strategies.  Zach Nelson has been appointed as chief strategy officer and will
 oversee corporate strategy, marketing and business development, as well as
 execution of the company's acquisition strategy.  Network Associates also
 announced that Ang Miah Boon has joined the company as the new vice president
 and managing director for the Asia-Pacific region.  Miah Boon has more than
 30 years of industry experience and will be responsible for overseeing the
 strategic direction and growth of the company's business in the Asia-Pacific
 region.  Furthermore, the company announced the appointment of George Samenuk
 to the additional role of chairman of the board and announced the election of
 two new members to the company's board of directors:
 Robert W. Pangia, who currently serves on the board of directors of
 ICOS Corp., Idec Pharmaceuticals Corp. and National Healing Corp.; and
 Robert M. Dutkowsky, chairman, president and chief executive officer of
 GenRad Inc.
     Also in the first quarter, Network Associates announced the settlement of
 a federal shareholder class action suit, filed in April 1999, arising from the
 accounting treatment of in-process research and development in connection with
 various acquisitions by Network Associates and predecessor corporations in
 1998 and prior years.
 
     Regarding products:
     -- McAfee was on the front lines during virus outbreaks in Q1, protecting
 its customers around the world from the AnnaKournikova and Naked Wife viruses.
 Customers including Commtouch and Sebastian International avoided financial
 loss due to the quality and efficiency of the McAfee product line and global
 McAfee AVERT research team.  In addition to Commtouch and Sebastian, the
 McAfee business unit announced customer deployments at Ford Motor Company,
 OmniComm, Elron Software, InsynQ and Quantum/ATL.  The McAfee business unit
 shipped its new e50 appliance targeting small to medium size businesses and
 the next version of McAfee Wireless for on-device handheld protection.
 
     -- Sniffer extended its lead in the wireless space with the shipment of
 Sniffer Portable 4.5 for third generation wireless networks and a strategic
 relationship with Agere Systems, formerly a division of Lucent.  Sniffer
 Wireless has been well received by customers and the press community garnering
 the "Product of the Year" award from Network Magazine.  In addition, customers
 including Aurora Health Care and ShareWave deployed the Sniffer Wireless
 technology.  Additional Q1 deployments of Sniffer technology include Novell,
 CIBC World Markets, Festo AG and InnovaCom.
 
     -- PGP announced two new contracts with the Defense Advanced Research
 Projects Agency (DARPA) and the National Security Agency (NSA).  In addition,
 PGP announced the deployment of E-Business Server at WellMed Inc. and secured
 top ratings in Information Security Magazine's reader's survey.  Finally,
 COVERT, Network Associates' advanced research team, further established itself
 within the security community, discovering and protecting users from
 vulnerabilities in BIND server software. BIND is a core part of the Internet's
 domain name resolution infrastructure - allowing the conversion of domain
 names into numeric Internet Protocol (IP) addresses.
 
     -- Magic shipped the latest version of its 100 percent browser-based
 service desk, Magic 7.0, as well as a new wireless platform to enable WAP
 access to applications developed on top of the Magic platform.  In addition,
 the Defense Logistics Agency (DLA) implemented Magic across more than
 500 administrative seats while Wausau Financial Systems adopted MagiCall, the
 industry's first browser-based computer telephony technology.
 
     Financial Outlook
     For the second quarter of the year, the company expects pro forma net
 revenue to be between $170 million and $180 million.  Consolidated net revenue
 is expected to be between $184 million and $194 million.  The pro forma net
 loss is expected to be between $0.03 and $0.06 per share.  The consolidated
 pro forma net loss is also expected to be between  $0.03 and $0.06 per share.
 For the year, the company is expecting pro forma net revenue in the range of
 $750 million to $780 million and consolidated net revenue in the range of
 $810 million to $840 million.  Pro forma net losses are expected in the range
 of $0.12 to $0.17 per share; and consolidated pro forma net losses are
 expected in the range of $0.11 to $0.16 per share.
     The company expects to return to profitability and be cash flow positive
 in the second half of 2001.  These expectations are based on current
 expectations of future market conditions.
     The company will host a conference call today at 5:00 p.m. Eastern Time,
 2:00 p.m. Pacific Time to discuss quarterly results. Participants should call
 888-455-3614 (domestic) or 415-228-4638 (international), Pass code:  NETA.
 Attendees should dial in at least 15 minutes prior to the conference call.
 The playback number is 800-391-9854 (domestic) or 401-220-9858
 (international).
     With headquarters in Santa Clara, Calif., Network Associates, Inc. is a
 leading supplier of security and availability solutions for e-businesses.
 Network Associates is comprised of four product groups: McAfee,  delivering
 world class anti-virus products; PGP Security, providing firewall, intrusion
 detection and encryption products; Sniffer Technologies, a leader in network
 and application management; and Magic Solutions, providing web-based service
 desk solutions. For more information, Network Associates can be reached at
 972-308-9960 or on the Internet at http://www.nai.com .
 
     Safe Harbor Statement
     The foregoing contains forward-looking statements. Forward-looking
 statements include those regarding expected operating results for Q2 2001 and
 remainder of the year; and return to profitability in the second half of
 fiscal 2001.  Statements regarding management's continued progress against its
 objectives for the first 180 days of George Samenuk's tenure -- including
 those with respect to increasing customer satisfaction, sales execution and
 increased efficiency, profitability and focused product development -- also
 constitute forward looking statements.  Actual results may vary, perhaps
 materially, from those contained in the forward-looking statements and the
 expected results may not occur.  Among other factors, actual results are
 subject to customer and distributor demand fluctuations and macro and other
 economic conditions both in the U.S. and internationally; successful sales
 force coordination and execution; attracting and retaining qualified sales
 force and other personnel; and successful development, introduction and
 adoption by customers of new products and enhancements that meet customer
 demand. More information on risks and uncertainties related to the company and
 its business may be found in the company's quarterly and annual reports filed
 with the United States Securities and Exchange Commission.
 
 
                             NETWORK ASSOCIATES, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                       (In thousands, except per share data)
                                    (Unaudited)
 
                                                        Three Months Ended
                                                             March 31,
                                                      2001               2000
 
     Net revenue                                   $170,339           $214,456
 
     Cost of revenue                                 33,913             32,243
 
       Gross profit                                 136,426            182,213
 
     Operating expenses:
 
       Research and development                      39,882             41,221
 
       Sales and marketing                          109,990             96,045
 
       General and administrative                    28,918             20,484
 
       Amortization of intangibles and
        stock compensation charge                    17,501             15,996
 
       Total operating expenses                     196,291            173,746
 
       Income (loss) from operations                (59,865)             8,467
 
     Interest and other income (expense),
      net                                             1,362              4,602
     Gain on sale of investments                          0             40,373
     Minority interest in consolidated
      subsidiaries                                      702              1,123
 
       Income (loss) before provision for
        income taxes                                (57,801)            54,565
 
     Provision (benefits) for income
      taxes                                         (10,440)            25,540
 
       Net income (loss)                           ($47,361)           $29,025
 
     Net income (loss) per share - diluted           ($0.35)             $0.20
 
     Shares used in per share calculation
      - diluted                                     137,140            144,372
 
 
                             NETWORK ASSOCIATES, INC.
                            CONSOLIDATED BALANCE SHEETS
                                  (In thousands)
                                    (Unaudited)
 
                                                 March 31,        December 31,
                                                     2001              2000
 
     Assets:
        Cash and marketable securities             $636,534          $694,153
        Accounts receivable, net                     80,457           122,315
        Prepaid expenses and other current
         assets                                      43,024            50,346
        Fixed assets, net                            75,348            75,499
        Deferred taxes                              215,643           200,260
        Intangibles and other long term
         assets, net                                220,951           242,275
              Total assets                       $1,271,957        $1,384,848
 
 
     Liabilities:
        Accounts payable                            $33,469           $46,816
        Accrued liabilities                         213,970           225,317
        Deferred taxes                                7,161             7,971
        Deferred revenue                            191,322           178,158
        Long term debt and other
         liabilities                                400,719           396,868
              Total liabilities                     846,641           855,130
 
     Minority Interest                               10,576            11,067
 
     Stockholders' Equity:
        Common stock                                  1,368             1,381
        Treasury stock                              (65,102)          (23,186)
        Additional paid-in capital                  687,247           685,423
        Accumulated other comprehensive
         loss                                       (39,595)          (31,266)
        Retained earnings (accumulated
         deficit)                                  (169,178)         (113,701)
              Total stockholders' equity            414,740           518,651
              Total liabilities, minority
               interest, and stockholders'
               equity                            $1,271,957        $1,384,848
 
 
                             NETWORK ASSOCIATES, INC.
                        PRO FORMA STATEMENTS OF OPERATIONS
                              (Excluding McAfee.com)
                       (In thousands, except per share data)
                                    (Unaudited)
 
                                                      Three Months Ended
                                                           March 31,
                                                     2001              2000
 
         Net revenue                               $157,523          $204,198
 
         Cost of revenue                             30,495            29,151
 
           Gross profit                             127,028           175,047
 
         Operating expenses:
 
           Research and development                  36,217            38,443
 
           Sales and marketing                      104,800            86,463
 
           General and administrative                27,093            18,496
 
           Amortization of intangibles and
            stock compensation charge                     0                 0
 
           Total operating expenses                 168,110           143,402
 
         Income (loss) from operations              (41,082)           31,645
 
         Interest and other income
          (expense), net                              5,977             7,768
         Interest expense on convertible
          debt                                            0                 0
         Minority interest in consolidated
          subsidiaries                                  131               (45)
 
           Income (loss) before provision
            for income taxes                        (34,974)           39,368
 
         Provision (benefits) for income
          taxes                                     (10,629)            9,321
 
           Net income (loss)                       ($24,345)          $30,047
 
         Net income (loss) per share -
          diluted                                    ($0.17)            $0.20
 
         Shares used in per share
          calculation - diluted                     144,701           151,932
 
     Note :  The above unaudited pro forma statements of operations exclude the
     effects of the following (in thousands):
 
     - Amortization of intangibles for the quarters ended March 31, 2001, and
       March 31, 2000, were $14,409 and $13,682, respectively.
     - Stock compensation charge for the quarters ended March 31, 2001, and
       March 31, 2000, were  $1,656 and $1,566, respectively.
     - Interest expense on convertible debt for the quarters ended
       March 31, 2001, and March 31, 2000, were $4,680 and $4,465,
       respectively.
     - Minority interest related to the equity investment in McAfee.com for the
       quarters ended March 31, 2001, and March 31, 2000, were $571 and
       $1,168, respectively.
     - Gain on sale of investments and additional provision for income taxes
       related to the gain on sale of investments for the quarter ended
       March 31, 2000, were $40,373 and $16,219, respectively.
 
         Note:  The above per share calculations treat convertible debt on an
         as-converted basis, resulting in an increase of 7,561,000 shares.
 
         The company believes that the above pro forma information is an
         additional meaningful measure of operating performance.  However,
         this pro forma information will necessarily be different from
         comparable information provided by other companies and should not be
         used as an alternative to our operating results and other financial
         information as determined under generally accepted accounting
         principles.
 
 

SOURCE Network Associates, Inc.
    SANTA CLARA, Calif., April 19 /PRNewswire/ --
 Network Associates, Inc. (Nasdaq: NETA) today announced that for the first
 quarter ended March 31, 2001, consolidated net revenue was $170.3 million.
 Excluding McAfee.com, Network Associates reported first quarter net revenue of
 $157.5 million. The pro forma net loss for the period, excluding McAfee.com
 and non-cash interest expense, amortization expense, and compensation charges
 related to employee stock options, was $24.3 million, or a loss of $0.17 per
 share.
     The company ended the quarter with cash and marketable securities totaling
 $636.5 million.  The reduction in cash and marketable securities relates to a
 $54 million settlement of all outstanding put options and a $6 million decline
 in the value of public equity investments.
     "We are on track with our 180-day plan," said George Samenuk, chairman,
 president and chief executive officer of Network Associates. "We have focused
 the team, throughout the business units and around the globe, towards the same
 common objectives-customer satisfaction, sales execution, increased
 efficiency, profitability and focused product development.  I'm very
 enthusiastic about the progress I've seen over the last three months and look
 forward to further change throughout 2001."
 
     Financial Highlights
     For the first quarter ended March 31, 2001, Network Associates reported
 consolidated net revenue of $170.3 million.  On a consolidated basis, and
 taking into account non-cash interest expense, amortization expense, and
 compensation charges related to employee stock options, the first quarter net
 loss was $47.4 million, or a loss of $0.35 per share.
 
      Operating Highlights
 
     Regarding the company:
     -- Network Associates announced key appointments to the executive staff in
 the first quarter, including Stephen C. Richards as its new chief financial
 officer.  Richards, a 23 year industry veteran, has an extensive Wall Street
 background and most recently held several senior executive positions with
 E*Trade Group, Inc., including chief financial officer, senior vice president
 for strategic development, and senior vice president for electronic trading
 strategies.  Zach Nelson has been appointed as chief strategy officer and will
 oversee corporate strategy, marketing and business development, as well as
 execution of the company's acquisition strategy.  Network Associates also
 announced that Ang Miah Boon has joined the company as the new vice president
 and managing director for the Asia-Pacific region.  Miah Boon has more than
 30 years of industry experience and will be responsible for overseeing the
 strategic direction and growth of the company's business in the Asia-Pacific
 region.  Furthermore, the company announced the appointment of George Samenuk
 to the additional role of chairman of the board and announced the election of
 two new members to the company's board of directors:
 Robert W. Pangia, who currently serves on the board of directors of
 ICOS Corp., Idec Pharmaceuticals Corp. and National Healing Corp.; and
 Robert M. Dutkowsky, chairman, president and chief executive officer of
 GenRad Inc.
     Also in the first quarter, Network Associates announced the settlement of
 a federal shareholder class action suit, filed in April 1999, arising from the
 accounting treatment of in-process research and development in connection with
 various acquisitions by Network Associates and predecessor corporations in
 1998 and prior years.
 
     Regarding products:
     -- McAfee was on the front lines during virus outbreaks in Q1, protecting
 its customers around the world from the AnnaKournikova and Naked Wife viruses.
 Customers including Commtouch and Sebastian International avoided financial
 loss due to the quality and efficiency of the McAfee product line and global
 McAfee AVERT research team.  In addition to Commtouch and Sebastian, the
 McAfee business unit announced customer deployments at Ford Motor Company,
 OmniComm, Elron Software, InsynQ and Quantum/ATL.  The McAfee business unit
 shipped its new e50 appliance targeting small to medium size businesses and
 the next version of McAfee Wireless for on-device handheld protection.
 
     -- Sniffer extended its lead in the wireless space with the shipment of
 Sniffer Portable 4.5 for third generation wireless networks and a strategic
 relationship with Agere Systems, formerly a division of Lucent.  Sniffer
 Wireless has been well received by customers and the press community garnering
 the "Product of the Year" award from Network Magazine.  In addition, customers
 including Aurora Health Care and ShareWave deployed the Sniffer Wireless
 technology.  Additional Q1 deployments of Sniffer technology include Novell,
 CIBC World Markets, Festo AG and InnovaCom.
 
     -- PGP announced two new contracts with the Defense Advanced Research
 Projects Agency (DARPA) and the National Security Agency (NSA).  In addition,
 PGP announced the deployment of E-Business Server at WellMed Inc. and secured
 top ratings in Information Security Magazine's reader's survey.  Finally,
 COVERT, Network Associates' advanced research team, further established itself
 within the security community, discovering and protecting users from
 vulnerabilities in BIND server software. BIND is a core part of the Internet's
 domain name resolution infrastructure - allowing the conversion of domain
 names into numeric Internet Protocol (IP) addresses.
 
     -- Magic shipped the latest version of its 100 percent browser-based
 service desk, Magic 7.0, as well as a new wireless platform to enable WAP
 access to applications developed on top of the Magic platform.  In addition,
 the Defense Logistics Agency (DLA) implemented Magic across more than
 500 administrative seats while Wausau Financial Systems adopted MagiCall, the
 industry's first browser-based computer telephony technology.
 
     Financial Outlook
     For the second quarter of the year, the company expects pro forma net
 revenue to be between $170 million and $180 million.  Consolidated net revenue
 is expected to be between $184 million and $194 million.  The pro forma net
 loss is expected to be between $0.03 and $0.06 per share.  The consolidated
 pro forma net loss is also expected to be between  $0.03 and $0.06 per share.
 For the year, the company is expecting pro forma net revenue in the range of
 $750 million to $780 million and consolidated net revenue in the range of
 $810 million to $840 million.  Pro forma net losses are expected in the range
 of $0.12 to $0.17 per share; and consolidated pro forma net losses are
 expected in the range of $0.11 to $0.16 per share.
     The company expects to return to profitability and be cash flow positive
 in the second half of 2001.  These expectations are based on current
 expectations of future market conditions.
     The company will host a conference call today at 5:00 p.m. Eastern Time,
 2:00 p.m. Pacific Time to discuss quarterly results. Participants should call
 888-455-3614 (domestic) or 415-228-4638 (international), Pass code:  NETA.
 Attendees should dial in at least 15 minutes prior to the conference call.
 The playback number is 800-391-9854 (domestic) or 401-220-9858
 (international).
     With headquarters in Santa Clara, Calif., Network Associates, Inc. is a
 leading supplier of security and availability solutions for e-businesses.
 Network Associates is comprised of four product groups: McAfee,  delivering
 world class anti-virus products; PGP Security, providing firewall, intrusion
 detection and encryption products; Sniffer Technologies, a leader in network
 and application management; and Magic Solutions, providing web-based service
 desk solutions. For more information, Network Associates can be reached at
 972-308-9960 or on the Internet at http://www.nai.com .
 
     Safe Harbor Statement
     The foregoing contains forward-looking statements. Forward-looking
 statements include those regarding expected operating results for Q2 2001 and
 remainder of the year; and return to profitability in the second half of
 fiscal 2001.  Statements regarding management's continued progress against its
 objectives for the first 180 days of George Samenuk's tenure -- including
 those with respect to increasing customer satisfaction, sales execution and
 increased efficiency, profitability and focused product development -- also
 constitute forward looking statements.  Actual results may vary, perhaps
 materially, from those contained in the forward-looking statements and the
 expected results may not occur.  Among other factors, actual results are
 subject to customer and distributor demand fluctuations and macro and other
 economic conditions both in the U.S. and internationally; successful sales
 force coordination and execution; attracting and retaining qualified sales
 force and other personnel; and successful development, introduction and
 adoption by customers of new products and enhancements that meet customer
 demand. More information on risks and uncertainties related to the company and
 its business may be found in the company's quarterly and annual reports filed
 with the United States Securities and Exchange Commission.
 
 
                             NETWORK ASSOCIATES, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                       (In thousands, except per share data)
                                    (Unaudited)
 
                                                        Three Months Ended
                                                             March 31,
                                                      2001               2000
 
     Net revenue                                   $170,339           $214,456
 
     Cost of revenue                                 33,913             32,243
 
       Gross profit                                 136,426            182,213
 
     Operating expenses:
 
       Research and development                      39,882             41,221
 
       Sales and marketing                          109,990             96,045
 
       General and administrative                    28,918             20,484
 
       Amortization of intangibles and
        stock compensation charge                    17,501             15,996
 
       Total operating expenses                     196,291            173,746
 
       Income (loss) from operations                (59,865)             8,467
 
     Interest and other income (expense),
      net                                             1,362              4,602
     Gain on sale of investments                          0             40,373
     Minority interest in consolidated
      subsidiaries                                      702              1,123
 
       Income (loss) before provision for
        income taxes                                (57,801)            54,565
 
     Provision (benefits) for income
      taxes                                         (10,440)            25,540
 
       Net income (loss)                           ($47,361)           $29,025
 
     Net income (loss) per share - diluted           ($0.35)             $0.20
 
     Shares used in per share calculation
      - diluted                                     137,140            144,372
 
 
                             NETWORK ASSOCIATES, INC.
                            CONSOLIDATED BALANCE SHEETS
                                  (In thousands)
                                    (Unaudited)
 
                                                 March 31,        December 31,
                                                     2001              2000
 
     Assets:
        Cash and marketable securities             $636,534          $694,153
        Accounts receivable, net                     80,457           122,315
        Prepaid expenses and other current
         assets                                      43,024            50,346
        Fixed assets, net                            75,348            75,499
        Deferred taxes                              215,643           200,260
        Intangibles and other long term
         assets, net                                220,951           242,275
              Total assets                       $1,271,957        $1,384,848
 
 
     Liabilities:
        Accounts payable                            $33,469           $46,816
        Accrued liabilities                         213,970           225,317
        Deferred taxes                                7,161             7,971
        Deferred revenue                            191,322           178,158
        Long term debt and other
         liabilities                                400,719           396,868
              Total liabilities                     846,641           855,130
 
     Minority Interest                               10,576            11,067
 
     Stockholders' Equity:
        Common stock                                  1,368             1,381
        Treasury stock                              (65,102)          (23,186)
        Additional paid-in capital                  687,247           685,423
        Accumulated other comprehensive
         loss                                       (39,595)          (31,266)
        Retained earnings (accumulated
         deficit)                                  (169,178)         (113,701)
              Total stockholders' equity            414,740           518,651
              Total liabilities, minority
               interest, and stockholders'
               equity                            $1,271,957        $1,384,848
 
 
                             NETWORK ASSOCIATES, INC.
                        PRO FORMA STATEMENTS OF OPERATIONS
                              (Excluding McAfee.com)
                       (In thousands, except per share data)
                                    (Unaudited)
 
                                                      Three Months Ended
                                                           March 31,
                                                     2001              2000
 
         Net revenue                               $157,523          $204,198
 
         Cost of revenue                             30,495            29,151
 
           Gross profit                             127,028           175,047
 
         Operating expenses:
 
           Research and development                  36,217            38,443
 
           Sales and marketing                      104,800            86,463
 
           General and administrative                27,093            18,496
 
           Amortization of intangibles and
            stock compensation charge                     0                 0
 
           Total operating expenses                 168,110           143,402
 
         Income (loss) from operations              (41,082)           31,645
 
         Interest and other income
          (expense), net                              5,977             7,768
         Interest expense on convertible
          debt                                            0                 0
         Minority interest in consolidated
          subsidiaries                                  131               (45)
 
           Income (loss) before provision
            for income taxes                        (34,974)           39,368
 
         Provision (benefits) for income
          taxes                                     (10,629)            9,321
 
           Net income (loss)                       ($24,345)          $30,047
 
         Net income (loss) per share -
          diluted                                    ($0.17)            $0.20
 
         Shares used in per share
          calculation - diluted                     144,701           151,932
 
     Note :  The above unaudited pro forma statements of operations exclude the
     effects of the following (in thousands):
 
     - Amortization of intangibles for the quarters ended March 31, 2001, and
       March 31, 2000, were $14,409 and $13,682, respectively.
     - Stock compensation charge for the quarters ended March 31, 2001, and
       March 31, 2000, were  $1,656 and $1,566, respectively.
     - Interest expense on convertible debt for the quarters ended
       March 31, 2001, and March 31, 2000, were $4,680 and $4,465,
       respectively.
     - Minority interest related to the equity investment in McAfee.com for the
       quarters ended March 31, 2001, and March 31, 2000, were $571 and
       $1,168, respectively.
     - Gain on sale of investments and additional provision for income taxes
       related to the gain on sale of investments for the quarter ended
       March 31, 2000, were $40,373 and $16,219, respectively.
 
         Note:  The above per share calculations treat convertible debt on an
         as-converted basis, resulting in an increase of 7,561,000 shares.
 
         The company believes that the above pro forma information is an
         additional meaningful measure of operating performance.  However,
         this pro forma information will necessarily be different from
         comparable information provided by other companies and should not be
         used as an alternative to our operating results and other financial
         information as determined under generally accepted accounting
         principles.
 
 SOURCE  Network Associates, Inc.

RELATED LINKS

http://www.mcafee.com