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Network Associates Reports Heavy Losses, Management Changes

Citing a slowdown in the Internet economy, security firm Network Associates Inc. reported a $120-million revenue shortfall Tuesday and senior management changes after the market closed.

The firm expects losses ranging from $130 to $140 million compared to earnings of $55 to $65 million for the fourth quarter of 2000. For the entire year of 2000, the company expects to report consolidated revenue in the range of $742 to $752 million and a net loss of $84 and $94 million.

Though actual results are not expected to be posted until January 25, 2001, it is clear that the fourth quarter resulted in a tremendous amount of losses -- enough so that several senior management changes were made.

Those in the exodus include Chief Executive Officer Bill Larson, who said he would step down as soon as another CEO was found by the company's board, President Peter Watkins, who is leaving the company later this week, and Chief Financial Officer Prabhat Goyal, will also step down when a new CFO is appointed.

Edwin Harper, a company director since 1993, has become chairman of the Network Associates board.

Network Associates said in a company statement Tuesday that it believes the lower fourth quarter demand is not related to the competitiveness of its products, but is due to concerns about the state of the economy from the customer base.

The firm also said it would transition its revenue recognition policy in the channel from a sell-in to a sell-through model next year because of the $120-million revenue shortfall its decision to take inventory returns as requested by distributors, leaving approximately $10 million of inventory in the distribution channel.

Leadership in the company's five business units -- PGP Security, Sniffer Technologies, Magic Solutions McAfee and myCIO.com -- will remain intact.