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McAfee.com: Bad News Is Good News

John McAfee is a legend in the software world. Ten years ago he had the crazy idea of giving away his anti-virus software. He posted it online and very shortly, thousands of downloads erupted. It didn't take long until it became a standard and his company was purchased by Network Associates .

Since that time, Network Associates has been on a buyout binge. But the results have been terrible. To help the situation, Network Associates decided to spin-off McAfee.com in December of last year.

True to its roots, McAfee.com is focused on Internet security. Essentially, the company is an application service provider (ASP) that outsources security needs. This makes sense. Threats are an on-going problem; so security must be something that is continually updated.

But the McAfee.com ASP solutions are not free; they are based on a subscription model. With it, users have the complete suite of necessary security products, as well as PC maintenance software (such as uninstaller, FirstAID, and Oil Change).

The company has been growing fairly quickly. In the past quarter, sales reached $10.3 million, which were up from $6.8 million in the same period a year ago (the sequential increase was 22%). In all, the company has over 500,000 paid subscribers. In fact, the company reached this milestone a few days ago -- faster than expected. This could bode well for the company's earnings report.

Interestingly enough, McAfee.com has also been able to sign a variety of advertising and sponsorship agreements. There are also licensing deals, such as with MSN Hotmail (58 million Hotmail users).

Despite the momentum, there are losses: $5.9 million in the last quarter. But the company has enough cash to last.

It seems that every week there is another pernicious virus awaiting in our Outlook email. It's definitely worrisome, especially with the severe damage to corporate networks. But, of course, this is great news for McAfee.com.

For example, in late May, there was the outbreak of the "ILOVEYOU" virus. McAfee.com had a solution for it and its Web traffic soared, increasing 229% above normal traffic levels (for the week, total visits from home users were 1.3 million and 1.4 million from users in the workplace). It's inevitable that further outbreaks will occur and many more users will hit the McAfee.com site for help (for a price).

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