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Technology / AI and automation

MARRIAGE OF UNEQUALS

The logic behind the merger of two software industry peers is usually transparent: they want to reap the benefits of greater market share, exploit a common infrastructure, show a more impressive revenue picture, display a broader product line or all of the above. Typically, the sales models of such companies are pretty much aligned and their product focus at least overlapping. In a word they have synergy. McAfee’s October acquisition of Network General to form Network Associates, in a stock swop valued at over $1.3bn, however, begs all sorts of questions about synergy between the two companies. McAfee is famed for its anti- virus PC software. But the company has been expanding into help desk automation software and general security programs. It has also been broadening the scope of its products to embrace local area networks. General, for its part, markets software and hardware for network fault analysis, but has increasingly been investigating performance management. To monitor the performance of a switched Ethernet network, for instance, Network General’s tools need to be able to get information from each end-node PC. So the reason for the coming together is apparent – McAfee wants greater LAN expertise and a wider, network-focused customer base, and Network General needs greater knowledge of the desktop client and the kind of mass market installed base that McAfee sports. The smaller company, McAfee, is certainly in robust health. In 1996, its revenues rose 101% to $181m with profits of $39m up from $14.9m in 1995. And its pace has hardly slackened. Most recently, it announced third quarter revenues of $88.3m, an 87% increase on the same period last year with profits to $24.5m from $13.0m. Slightly larger and slightly slower, Network General posted revenues of $240.7m in the year to 31 March 1997, up 27%. Its second quarter revenues of $64.6m represented a 16% increase, and the company reported a loss of $15.9m, though that included a $23.7m charge associated with its acquisition of network management toolmaker Cinco. Projecting a combined 1997 revenue of $600m, the merged management team now needs to prove that there is real synergy between both groups.

This article first appeared in Computer Business Review

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CBR Staff Writer

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