By Kevin White
Network Associates stock plunged a further 27% to hit an $11 low last week after CEO Bill Larson tried in vain to steady the nerves of a jittery investor community which he had to once more warn of slower than expected sales. After spending some $2.7bn acquiring itself a bigger business it’s likely that Network Associates revenues for 1999 will actually be less than they were in 1998. First quarter sales for 2000 will be poor, too, investors were warned in a teleconference.
It’s becoming pretty clear that the network security supplier has been trying to grow at a pace that actually outstripped market expectations. The promise of continued 30%-35% growth rates that Network Associates has been associated with over the past 18 months has proved unsustainable and Wall Street has now accepted slower but steadier growth as the only way forward. Estimates for fiscal 1999 vary but the consensus seems to be that revenues will be around $875m, trailing previous year numbers by nearly $100m.
Despite sluggish sales the company claims considerable pent-up demand for its products. Once it settles its current inventory problems there are expectations of high volume channel sales of anti-virus and network analyzer products, in particular. These are two Network Associates strongholds. In anticipation, the company has put out an upgrade to its Sniffer Analyzer network troubleshooter to include support for FDDI and ATM technologies. And on the anti-virus front, leveraging its $640m purchase of Dr Solomon’s, NAI will have a consistent anti-virus engine across all product lines when its WebShield firewall virus scanner adopts the acquired Dr Solomon engine, probably the strongest on the market, in the second quarter 1999.
Rivaling Symantec, Trend Micro and Computer Associates, Network Associates now dominates the market for anti-virus software with an estimated 40 million seats. It is also one of the few vendors to cater to what Gartner Group has described as a preferred three-tier virus protection architecture. At the desktop level Network Associates has VirusScan and Dr Solomon’s Anti Virus Toolkit; sitting at the server there’s NetShield; and up at the firewall it has MailGuard from Dr Solomon’s and its own WebShield offerings. Such is the level of competition for business in this area however, that Meta Group analysts suggest that during 1999 the squeeze on anti-virus software suppliers will push price-tags down to $10 a head for an entire virus suite.
Network Associates will expect fatter margins in other areas of its business. And there are a good many areas to work with. In the past couple of weeks the Santa Clara-based supplier has launched a browser-based front-end to its Magic Total Service Desk Enterprise Edition in the area of helpdesk software, and for asset management something called ZAC 2001 for running desktop Y2K compatibility checks. Bundled with the company’s various ZAC desktop management tools, this will allow Magic TSD (previously known as Merlin) to square up to comparable products from its principal market rival Remedy. In the risk assessment space Network Associates has produced a Linux version of the CyberCop Scanner network vulnerability test system, and for network security management it’s unveiled its Active Security roll-out.
As well as selling tools, Network Associates is trying to position itself as a solutions supplier, with products spanning virus control and network monitoring, encryption, authorization and access control and it intends using a freshly developed console-based ‘event manager’ as a focus for enterprise network management. The whole approach has been dubbed Active Security, a development of the company’s firewall, network scanning, intrusion detection, encryption and VPN products to enable them to issue and react to alerts sent through a central console.
Several of the company’s existing product lines are now in the process of being re-developed to include Active Security features. These include the Gauntlet firewall and VPN lines, the CyberCop Scanner and CyberCop Monitor network vulnerability products, WebShield for firewall level virus scanning, and the Net Tools PKI Server that will ship with Gauntlet Active Firewall and will support VeriSign and Entrust certificates.
Sitting at the hub of the scheme the event manager, a Visual Basic scripting system known as Event Orchestrator, can be used to dictate network events and actions in a way that is coordinated according to an organization’s pre-set network security policy statements. The Pretty Good Privacy code bought in during 1997 is used extensively throughout the process to ensure authentication.
The product still has some evolving to do but ‘it’s now stitched together’ Graham Curme, one of Neta’s European directors, told us. It’s by far the most comprehensive option on the market, it is firewall independent and we feel confident it can accommodate a customer’s existing security products, he said. Out in the field, businesses are looking to use a selection of what they consider best-of-breed products. They want tight integration between them. And they want their network security policy to have a central point of control from where it can be easily enforced. It’s a wish list Network Associates will need to be able to match before Larson’s dream of building a top ten software supplier is a reality.
