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McAfee Reports Q1 2010 Results

McAfee, Inc. (NYSE:MFE) today reported financial results for the first quarter ended March 31, 2010. McAfee LogoMcAfee generated $502.7 million in revenue, a first quarter record and marking their 17th consecutive quarter of double-digit, year-over-year revenue growth along with record operating cash flow. With the rapid growth, executives admit they continue to have finance and operations issues.

McAfee, Inc. (NYSE:MFE) today reported financial results for the first quarter ended March 31, 2010. McAfee LogoMcAfee generated $502.7 million in revenue, a first quarter record and marking their 17th consecutive quarter of double-digit, year-over-year revenue growth along with record operating cash flow. With the rapid growth, executives admit they continue to have finance and operations issues.

“In the first quarter of 2010, we were especially pleased with our record consumer business performance which has been an area of strategic investment for us,” continued DeWalt. “At the same time, we experienced delays in the closing of certain large deals, modest growth in the midmarket segment and foreign currency headwinds that were greater than we anticipated.”

During the earnings call, the company cited some operational and transactional challenges which, executives said, pushed a single deal valued at $7 million and several deals valued at over $1 million, into Q2 that they had hoped to book for Q1. Going into detail on the $7m deal, the company said a single component of the deal did not ship on time preventing it being booked for Q1. Additionally, the company said a stronger dollar and currency fluctuations had a negative impact on revenue of $12 million quarter-over-quarter and a negative impact on deferred revenue of $34 million quarter-over-quarter.

Moving forward, McAfee expects the recent faulty antivirus signature update to have a negative impact of $0.01 to $0.02 per share in the second quarter along with an estimated $0.04 to $0.05 per share negative impact due to foreign currency fluctuations.

First Quarter 2010 Breakdown by Business Category

Corporate Business:

• Revenue grew 13 percent year-over-year to a first quarter record of $313 million

• McAfee closed 376 deals greater than $100,000 in value, including 56 deals greater than $500,000 in value and 19 deals greater than $1 million in value

Consumer Business:

• Revenue grew 11 percent year-over-year to a record $190 million

• McAfee signed or extended 24 agreements and launched 72 new or enhanced online partnerships, representing more than 200 brand name partners worldwide

North America:

• Revenue grew 12 percent year-over-year to a first quarter record of $284 million

• North American revenue accounted for 57 percent of total revenue for the first quarter of 2010 and for the first quarter of 2009

International:

• Revenue grew 13 percent year-over-year to a first quarter record of $219 million

• Currency fluctuations had a negative impact of $12 million on revenue quarter-over-quarter and a positive impact of $11 million year-over-year

• As reported in U.S. dollars, year-over-year revenue grew 14 percent in Europe, the Middle East and Africa, 22 percent in Asia Pacific, three percent in Japan and 17 percent in Latin America • International revenue accounted for 43 percent of total revenue for the first quarter of 2010 and for the first quarter of 2009

Balance Sheet and Cash Flow Summary:

• Cash and marketable securities was $902 million

• The company repurchased approximately 3.7 million shares of its common stock for $150 million under its stock repurchase program

• Cash flow from operations reached a record $157 million

• Days sales outstanding (DSOs) were 41 days, down seven days compared to the same period last year • Deferred revenue reached a first quarter record of $1.379 billion, despite a negative foreign currency impact of approximately $34 million quarter-over-quarter

• Approximately 79 percent of revenue during the first quarter of 2010 came from prior period deferred revenue

The company plans to annouce a new CFO shortly and has launched several new products and services including a next generation firewall product line, mobile security products and Data Loss Prevention (DLP) solutions.

The stock (NYSE:MFE) closed today at $39.53, down 0.98% and is currently -10.19% in aftermarket trading.

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