Bill Larson Era
Much of the trouble that has plagued NAI of late can be traced to the alleged questionable accounting and sales practices that took place during the Bill Larson era. Larson, CEO of the Santa Clara, Calif., company in the late 1990s, was famous among employees and competitors for being intensely driven, competitive and charismatic. During companywide meetings, he would speak for hours at a time, exhorting his troops to keep the pressure on the competition and to sell more. Under Larsons leadership, the company, once known as McAfee Associates, grew by leaps and bounds. But it also gained a reputation for pushy sales tactics that former NAI employees said sometimes included eleventh-hour demands that customers buy more software days before the end of a fiscal quarter to help the company make its revenue projections. The company was also using an accounting method that allowed it to recognize revenue as soon as NAI shipped products to its resellers, instead of when those resellers actually sold the software to customers.None of NAIs current executives, most of whom joined in 2001, was with the company during this time period, although they have spent much of their time dealing with the fallout. The specter of the legal problems has hung over the company for years. "The challenge of getting rid of the taint of the former management is a pain in the neck," said Gene Hodges, president of NAI. "I dont even sit in on those meetings when George [Samenuk, CEO of NAI] goes over that stuff. I dont even want to know about it. We still have a lot of work to do. The technological part of this strategy is going to be a challenge. "Intrusion prevention technology requires that you build anomaly and IDS [intrusion detection system] capabilities to anticipate future attacks," he said. "The technology is not going to be static." Next page: What intrusion prevention encompasses.
All of this eventually attracted the attention of the SEC and the Justice Department, and both launched investigations into NAIs accounting practices. Investors got in on the act as well, filing several lawsuits charging that the company overstated revenue and committed other abuses. NAI settled the suits in September for $70 million, and Terry Davis, a former NAI executive, pleaded guilty to securities fraud earlier this year. NAI eventually restated several quarters of financial results. Both the government probes continue.