Layoffs Loom As Network Associates Dashes Talk Of Sale

Focusing on the definition of what it means to be a public company, Network Associates spokeswoman Jennifer Keavney effectively distanced the company from industry speculation of an acquisition by stating that while it "would need to legally consider offers that benefit its owners, the shareholders of Network Associates," the company was "not considering offers from Microsoft or any other company at this time."

Keavney's statement came almost 24 hours after Network Associates declined to comment to CRN on claims made by several Wall Street sources that it was quietly looking for a buyer.

Keavney did not dismiss the possibility of July 1 layoffs at Network Associates, as reported by CRN Monday. (See story). "Network Associates has made a commitment to investors to achieve a 25 percent operating margin by the middle of 2005," she said when asked to confirm or deny July 1 layoffs.

In an April 22 press release, Network Associates said that to attain such an operating margin, "The company is taking several steps 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."

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Network Associates' reseller partners across the United States have said more than a few of the company's field representatives have recently begun circulating resumes. "A lot of [Network Associates] salespeople have opened up feelers for where they are going to land," one partner said. Every partner given a date for layoffs by Network Associates' employees were told July 1. Fearing reprisal, none of the partners agreed to be named.

Several Wall Street sources also said Network Associates was quietly looking for a buyer. One such source recently met in person with Network Associates Chairman and CEO George Samenuk and Stephen Richards, the company's COO and CFO. "It's for sale," the source said of Network Associates.

Microsoft has been suggested by sources as a potential buyer based on the software giant's desire to ascend to a level in the security market that is competitive with Network Associates rivals Symantec, Computer Associates International and Trend Micro. Microsoft is armed with a number of antivirus tools for Windows and is rolling out a next-generation application layer firewall, a VPN and a Web cache solution. But possession of Network Associates' extensive intellectual property would complete a security offering for Microsoft that could go head-to- head with Symantec, CA, Trend Micro and others. Microsoft representatives said it was policy not to comment on the company's acquisition plans.

Wall Street sources agreed that Microsoft may also be the only willing buyer of a for-sale Network Associates, as few companies with the wherewithal to purchase it were interested.

It appears that Network Associates has been grooming itself to fit the bill for an acquisition by Microsoft, many Network Associates partners said.

One partner, who is also a veteran of the Digital Equipment Corp./Compaq merger, said the signs coming from Network Associates are similar to that of pre-merger DEC, citing Network Associates' sale of its PGP encryption product line, its Gauntlet firewall business and most recently its Sniffer network monitoring division. The partner said Network Associates' downsizing was exactly what DEC did in order to fit within Compaq. "It was a divestiture of all the things Compaq didn't want," the partner said.

The sudden, announced departure of Donna Troy, Network Associates' executive vice president of worldwide channel sales, and the sudden, unannounced departure of Gary Brand, director of channel sales, each resonated with partners as signs of impending change.

At Network Associates' recent Partner Symposium in San Antonio partners were repeatedly encouraged to make sure their product licensing was up to date, another sign that the company was trying to set its house in order prior to a sale, partners said.