Update: Network Associates Up For Sale, Sources Say

Network Associates is for sale, and Microsoft is rumored to be the buyer.

The maker of McAfee antivirus and security products has not made it public, but a "for sale" sign figuratively hangs from Network Associates' front door, according to Wall Street sources and channel partners.

A public announcement concerning either the pending or closed sale of the company to a buyer could come as early as July 1 when Network Associates also plans to announce layoffs associated with the company's for-sale status, these sources said.

After initially declining to comment, Network Associates spokesperson Jennifer Keavney said Tuesday the company was "not considering offers from Microsoft or any other company at this time." She did say however that the company would "need to legally consider offers that benefit its owners, the shareholders of Network Associates."

Also, Keavney did not dismiss the likelihood of layoffs, saying that "Network Associates has made a commitment to investors to achieve a 25 percent operating margin by the middle of 2005."Network Associates' reseller partners across the United States said more than a few of the company's field representatives have recently begun circulating resumes. "A lot of [Network Associates] salespeople have opened up feelers for where they are going to land," one partner said.

Some Network Associates employees gave partners July 1 as the date Network Associates planned to execute the layoffs. The partners asked to remain anonymous.

Microsoft enters the picture as a potential buyer based on the Redmond, Wash.-based software giant's desire to ascend to a level in the security market competitive with Network Associates rivals such as Symantec, Computer Associates International and Trend Micro, sources said.

Microsoft is armed with a number of antivirus tools for Windows and is rolling out a next-generation application layer firewall, a VPN and a Web cache solution. But possession of Network Associates' extensive intellectual property would complete a security offering for Microsoft that could go head-to-head with Symantec, CA, Trend Micro and others. Microsoft representatives said it was policy not to comment on the company's acquisition plans.

Still, Microsoft may also be the only willing buyer, Wall Street sources said, as few companies with the wherewithal to purchase Network Associates are interested.It appears that Network Associates has been grooming itself to fit the bill for an acquisition by Microsoft, many Network Associates partners said.

One partner, who is also a veteran of the Digital Equipment Corp./Compaq merger, said the signs coming from Network Associates are similar to that of pre-merger DEC, citing Network Associates' sale of its PGP encryption product line, its Gauntlet firewall business and most recently its Sniffer network monitoring division. The partner said Network Associates' downsizing was exactly what DEC did in order to fit within Compaq. "It was a divestiture of all the things Compaq didn't want," the partner said.

The sudden, announced departure of Donna Troy, Network Associates' executive vice president of worldwide channel sales, and the sudden, unannounced departure of Gary Brand, director of channel sales, each resonated with partners as signs of impending change.

At Network Associates' recent Partner Symposium in San Antonio partners were repeatedly encouraged to make sure their product licensing was up to date, another sign that the company was trying to set its house in order prior to a sale, partners said.

And in a recent interview with CRN, company president Gene Hodges said the security vendor's name change to McAfee was designed to sharpen its brand visibility.0