Network Associates Inc. on Thursday said that it has discovered some accounting inaccuracies in its 1999 and 2000 financial statements and has begun an internal investigation into the matter.
As a result, NAI will have to restate its results for these years, which also has led the company to withdraw its exchange offer for McAfee.com Corp.
NAI officials found the problems while they were preparing a tax filing for the 1999 tax year, and while they say that the true scope of the issue isnt clear at this point, they dont believe it extends to 2001 or the first quarter of 2002.
“The full extent of the restatement has yet to be determined,” said George Samenuk, CEO of NAI, based in Santa Clara, Calif. “We dont have a clear understanding of all the facts.”
Company officials did say that the preliminary investigation shows that the inaccuracies likely affect both revenues and expenses.
NAIs announcement Thursday is just the latest in a string of roadblocks that have cropped up this year for the company.
The Securities and Exchange Commission is conducting its own investigation into alleged accounting problems at the company.
The investigation stems from a series of events that occurred in December 2000, including a change in the companys accounting policy, the resignation of its CEO and two other senior officers, and the announcement of a large net loss for the fourth quarter of 2000. NAI at that time changed its revenue-recognition model to book revenue only after its resellers had actually sold the product to customers.
Previously, the company recognized revenue as soon as it shipped its products to resellers.
And NAIs attempt to repurchase the outstanding shares of McAfee.com, its former subsidiary, has been sidetracked by all of this as well. First, McAfee.coms board rejected the offer as too low. Then, once NAI raised its offer and McAfee.com accepted it, NAI withdrew it once the SEC informed the company of its investigation.
Now, the offer seems to be finished for the foreseeable future.
“The McAfee.com offer is done. Done,” Samenuk said Thursday in a conference call regarding the internal investigation.
For their part, McAfee.com officials said NAIs troubles and the withdrawal of their exchange offer will have no effect on McAfee.coms business. “What does this mean to us? In a nutshell, nothing,” said Srivats Sampath, CEO of McAfee.com, based in Sunnyvale, Calif. “It did cause some angst among the employees, but the message we gave them was its not done till its done.”