McAfee Q1 Profits Decrease On Delayed Deals, Botched Antivirus Update


McAfee's profit fell to $37.6 million, compared to $53.4 million, a 30 percent decrease from Q1 2009. Revenue increased 12 percent to $508 million, up from $447 million in the same quarter last year.

DeWalt said on an earnings call Thursday that the falling profits stemmed, in part, from operational and corporate execution issues, in particular driven by a $7 million deal that failed to be properly closed before the quarter ended and was subsequently relegated to backlog. "We take full responsibility,' DeWalt said, adding that other million-dollar deals were not adequately booked and closed, resulting in delays that caused resulting profits to be rolled over into Q2.

"It was disappointing for me and the team not to book these at the end of the quarter," DeWalt said.

DeWalt also said that some of the execution problems included "getting some products out the door," as well as problems with the hardware side of the business and subscription and licensing issues. "We've got to do a better job of execution," he said.

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Additionally responsible for the decline in profits was McAfee's release of a faulty antivirus update file last week, DeWalt said, which caused widespread shutdown of thousands of enterprise and consumer computers running Windows XP Service Pack 3, subjecting them to an endless reboot loop.

DeWalt said that the company anticipated that the flawed DAT file release would negatively impact the company by at least $.01 to $.02 cents per share, in light of costly remediation efforts, among other things.

DeWalt added that the certain components of the company's midmarket and SMB segments also suffered during Q1, which contributed to the Santa Clara, Calif. company's plummeting profits.

"When you look at the endpoint side of the SMB, we couldn't be happier," DeWalt said. "Our biggest challenge is in our appliance business and networking business. When you jump to other theaters, there we have our softness."

Looking forward, McAfee anticipates a relatively weak Q2 forecast, with revenues at between $500 million and $520 million.

"We try to take in all the variables," DeWalt said, adding that the DAT impact, and the rolled over business, drove executives to offer a guidance that would allow the company to "underpromise and overperform for next quarter."

"We've just got to put Q1 behind us and drive," he said.