McAfee.com has an IPO in its future

McAfee.com, the online arm of Network Associates Inc.

McAfee.com, the online arm of Network Associates Inc., the 800-pound gorilla of the security market, is going public.

The Santa Clara, Calif., company announced this morning that, as expected, it will begin selling shares of McAfee.com common stock in an initial public offering now slated for the fourth quarter.

Company officials said that since its launch late last year, McAfee.com, a Web site that provides PC anti-virus updates as well as patches for desktop problems such as Y2K bugs, has received more than 1 million registered users. But despite its apparent success, it hasn't received the big-dollar Internet valuation that company officials would like to see.

Part of that problem is Network Associates itself. Although the company has by far the largest share of the security market and continues to lead anti-virus software sales (according to recent market numbers released by International Data Corp.), sales of products such as firewalls and intrusion detection software -- picked up in the course of a two-year acquisition spree -- have been a disappointment, leading several brokerages to downgrade the once-hot stock to "neutral" status.

Deeper issues?

While Network Associates officials attribute many of those problems to corporate reluctance to purchase new enterprise software in the shadow of the year 2000, analysts worry that the company has deeper issues with its sales channels. Network Associates has also faced an uphill battle in the debate over best-of-breed vs. suite purchasing in security. The company has spent the better part of the last year integrating its wide range of security and help-desk software, but corporate purchasing of security software has so far proven to be piecemeal, with companies picking up pieces of an overall infrastructure as needed.

In a Form S-1 statement filed with the Securities & Exchange Commission, McAfee.com registered to sell up to $57.5 million of its Class A common stock to the public. No initial offering price was mentioned in a written release that went out earlier today.

Morgan Stanley Dean Witter will act as the lead underwriter of the offering, which will be co-managed by BancBoston Robertson Stephens and Hambrecht & Quist.

The "carve-out" of the online site will leave Network Associates holding 80 to 90 percent of the online company's total value, according to company officials.

Network Associates' shares were trading at 20 5/8 late this afternoon.

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