Disappointing Sales Hammer Network Associates Stock
Network Associates Inc. shares lost nearly half their value Tuesday after the maker of computer security software said that fourth-quarter results will fall short of forecasts and that it will replace its top executives.
The firm said it expects to report a fourth-quarter loss because sales are likely to total between $55 million and $65 million--about a quarter of what it reported in the quarter ended in September.
The poor quarter marks the latest in a series of stumbles for a management team led by Chairman and Chief Executive William Larson, who ran the company for seven years, building it through acquisitions of companies such as Dr. Solomon’s Group.
Shares in Network Associates have fallen 83% over the last two years as the company has missed earnings forecasts and failed in its strategy of bundling products into complex product suites.
The board stripped Larson, 44, of his title as chairman, replacing him with Edwin Harper, an outside director who was president of Syquest Technology Inc. from June 1996 to December 1998.
Larson will step down after the company finds a new chief executive.
President Peter Watkins, 45, will leave the company effective Sunday, while Chief Financial Officer Prabhat Goyal will stay until a successor is appointed, the company said.
Shares in Network Associates plunged to as low as $6 in after-hours trading, down 49%. The shares had closed at $11.75, down 13 cents, on Nasdaq, before the announcements.
The company said it expects to report an operating loss of between 94 cents and $1.02 per share for the fourth quarter. Goyal had said in October that the firm expected a profit of 32 cents in the quarter. Analysts on average had expected 31 cents.
Larson described the disappointing results as a “one-time event” in a conference call. He said they resulted from a change in accounting practices by which the company will book sales only after a product is sold to the final customer.
Network Associates previously recognized sales when they were sold to a distributor. It made the change because some distributors are having financial troubles, causing them to cut software inventory, Larson said.
