NAI Cuts Workforce

 
 
By Dennis Fisher  |  Posted 2003-05-16
 
 
 
Network Associates Inc., which has spent more than $200 million on acquisitions this spring, laid off about 150 employees this week, sources close to the company say.

An NAI spokesperson said the layoffs, which totaled about 3 percent of the companys workforce, were done for a combination of reasons, including employee performance and strategic engineering investments. The company is not divulging the exact number of employees who were let go.

The layoffs come at a time when the Santa Clara, Calif., security company is not only trying to integrate the technology and people of the acquired companies, but is also dealing with two separate government investigations of its accounting practices. The number of people let go is small in relation to the overall total of more than 3,500 employees at the company. However, the vast majority of the layoffs came from the sales organization, which is curious for a company that had a disappointing first quarter and is looking to improve on the weak results.

One source said management didnt give the laid-off employees any specific reason for the cuts. But many of those who were let go saw the reductions coming.

"We knew it was coming. It hasnt been a very positive situation around that office lately," said one employee who was let go this week. "What was shocking to me is that the cut so many salespeople. Theyre the ones who push the product. Do the math."

Sources said the McAfee Security and Sniffer Technologies business units both were affected by the cuts, but its unclear whether anyone was let go from the Magic Solutions group.

In addition to the cuts to the sales staff, a few engineers and a handful of other employees were let go, as well. The layoffs are just the latest in a series of moves NAI has made to try and cut costs. The company recently consolidated the staff in its Silicon Valley headquarters from 11 floors to five. And early this year several hundred workers were given the choice of either moving to a facility in Plano, Texas, or taking a financial package and leaving the company.

Many of the employees who moved south were in administrative positions, and there are now about 1,000 employees at the Texas facility—more than the number who work in the California headquarters.

Analysts said the layoffs could be the result of some overlap in the staffs of NAI and IntruVert Networks Inc. and Entercept Security Technologies, the two intrusion-prevention companies it acquired recently. NAI paid a total of $220 million for the two companies.

"You expect them to be heavy [after the acquisitions]. But the question is whether their sales force was prepped and ready to sell that kind of heavy enterprise-class intrusion-prevention hardware and software," said Pete Lindstrom, research director at Spire Security LLC, an analyst firm in Malvern, Pa. "That big stuff requires more hand-holding and training for the salespeople."

As it works through its internal issues, NAI is also facing questions from both the Department of Justice and the Securities and Exchange Commission over the companys handling of a change to its accounting practices several years ago. As a result of the inquiries, NAI recently restated its earnings for 1998-2000.

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