Network Associates to restate results for three years

Citing information uncovered through federal investigations into its accounting practices, Network Associates Inc. said Wednesday that it is restating financial results for fiscal years 1998, 1999 and 2000. The antivirus software vendor also said it would delay filing its 2002 Form 10-K, which is due March 31, so it can restate those results for prior years.

The Santa Clara, Calif.-based company, which is under investigation by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice, said the restatement will reflect revenue on sales to distributors on a sell-through basis. That, the company said in a statement today, is how it has reported sales to distributors since the beginning of 2001.

Although the announcement offered few details, Network Associates said the restatement "may also include other matters addressed by the government investigations."

The company said the changes should not affect financial results reported in or since fiscal year or 2001, "except insofar as some of the adjustments to fiscal 2000 postpone revenue recognition and related costs on distributor sales into 2001." Network Associates said it plans to file the Form 10-K as soon as it can.

A year ago today, Network Associates announced that the SEC was looking into questions about the company's accounting (see story), but this is the first time it has said the Justice Department is also involved in the probe. It isn't clear when the Justice Department joined the investigation.

On March 26, 2002, Network Associates announced that it was under investigation by the SEC for a series of events that happened on Dec. 26, 2000, when then-CEO William Larson, President Peter Watkins and Chief Financial Officer Prabhat Goyal suddenly quit. Also on Dec. 26, 2000, the company unveiled sweeping changes to its channel sales policy and announced that its fourth-quarter revenue for 2000 would come in at $55 million to $65 million, roughly one quarter of the $239 million revenue it had announced in October.

The events pushed the company's share price down 63 percent the next day.

Last year, Network Associates CEO George Samenuk said a review of the company's accounting practices for 2000 showed that the accounting methods had been "proper."

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