and McAfee.comran smack into a brick wall Thursday with the announcement that accounting inaccuracies would force yet another withdrawal of the $225 million buyout bid.
The Santa Clara, Calif.-based Network Associates said the accounting errors were found in its 1999 and 2000 financial statements. "(We are) conducting an internal investigation under the direction of the Audit Committee of its Board of Directors to determine the scope and magnitude of these inaccuracies," the company said, adding that the 1999 and 2000 financials would be restated.
The announcement pushed the company's stock into a tailspin Thursday morning, with investors bailing at yet another hint of trouble. In the early going, Network Associates shares were trading in the $20 range, almost 15 percent off Wednesday's $23.75 close.
Thursday's surprising announcement also goes against the company's insistence last month that its auditors were comfortable with the 1999 and 2000 numbers. Already the subject of an investigation by the SEC into accounting irregularities, Network Associates said it would keep the SEC staff informed of its internal investigation.
"Although the investigation is still in its preliminary stages and the full extent of the restatement and all covered periods have yet to be conclusively determined, nothing has come to the attention of management or the Audit Committee that indicates the results of operations for 2001 or Q1 2002 require restatement," the company said.
The latest twist has again derailed plans by Network Associates to pay about $225 million for the outstanding shares of McAfee that it does not already own.
Network Associates owns about 75 percent of the anti-virus software firm it spun off in 1999. Terms of the share exchange off, which was set to expire midnight Thursday, called for McAfee's shareholders to receive 0.78 of a share of Network Associates stock in exchange for each outstanding share of McAfee.com stock.
The bid was sweetened after McAfee's board rejected the original offer, which was valued at $208 million.
Network Associates, which sells anti-virus, network management, and help desk software, was planning to effect a "short-form" merger of McAfee with one of its subsidiaries.