The on-off-on-off marriage between security software firms Network
Associates and McAfee.com
ran smack
into a brick wall Thursday with the announcement that accounting
inaccuracies would force yet another withdrawal of the $225 million buyout
bid.
The Santa Clara, Calif.-based Network Associates said the accounting errors
were found in its 1999 and 2000 financial statements. “(We are) conducting
an internal investigation under the direction of the Audit Committee of its
Board of Directors to determine the scope and magnitude of these
inaccuracies,” the company said, adding that the 1999 and 2000 financials
would be restated.
The announcement pushed the company’s stock into a tailspin Thursday
morning, with investors bailing at yet another hint of trouble. In the
early going, Network Associates shares were trading in the $20 range, almost
15 percent off Wednesday’s $23.75 close.
Thursday’s surprising announcement also goes against the company’s
insistence last month that its auditors were comfortable with the 1999 and
2000 numbers. Already the subject of an investigation by the SEC into accounting irregularities, Network
Associates said it would keep the SEC staff informed of its internal
investigation.
“Although the investigation is still in its preliminary stages and the full
extent of the restatement and all covered periods have yet to be
conclusively determined, nothing has come to the attention of management or
the Audit Committee that indicates the results of operations for 2001 or Q1
2002 require restatement,” the company said.
The latest twist has again derailed plans by Network Associates to pay about
$225 million for the outstanding shares of McAfee that it does not already
own.
Network Associates owns about 75 percent of the anti-virus software firm it
spun off in 1999. Terms of the share exchange off, which was set to expire
midnight Thursday, called for McAfee’s shareholders to receive 0.78 of a
share of Network Associates stock in exchange for each outstanding share of
McAfee.com stock.
The bid was sweetened after McAfee’s board rejected the original offer, which was valued at $208 million.
Network Associates, which sells anti-virus, network management, and help
desk software, was planning to effect a “short-form” merger of McAfee with
one of its subsidiaries.
