August 2, 2005

McAfee Sees More Deals Soon with Mobile Companies

SAN FRANCISCO -- McAfee Inc., the world's second-biggest security software maker, on Tuesday said it was poised to sign several deals in coming months with mobile-device makers, which have increasingly focused on equipping their handsets with anti-virus protection.

"We see several deals in the offing," McAfee President Gene Hodges told investors at an RBC Capital Markets conference in San Francisco.

He later told Reuters the time-frame on those deals was "coming months" and said it includes "big" mobile-device makers, but declined to comment on which companies were involved and where they were based.

McAfee already provides NTT DoCoMo Inc. <9437.T>, Japan's top mobile-phone operator, with security products on about 9 million handsets. That number is expected to rise to about 40 million by the end of 2006, Hodges said.

McAfee's mobile-device security products are expected to add fractionally to earnings per share in fiscal 2006, and contribute even more to EPS in 2007, Hodges said.

McAfee -- whose competitors include California rival and biggest security vendor Symantec Corp. <SYMC.O> and Finland's F-Secure <FSC1V.HE> -- reported healthy fiscal 2005 second-quarter results last week.

McAfee, based in Santa Clara, California, has established itself as one of the top makers of software that protects desktop and laptop computers from Internet nuisances like viruses and spyware that can shut down systems and track users' online habits.

But so-called malicious code writers are beginning to target the growing market for "smart" phones, which allow users to access e-mail and the Internet.

The virus threat to mobile devices is small at the moment because there is no dominant standard software that provides a giant target for virus writers, as there is with Microsoft's Windows operating system in the PC world.

McAfee sees a market for 2 billion mobile devices by the end of 2008, Hodges said.

He said McAfee would also make use of its nearly $1 billion in cash with some small acquisitions and share buybacks.

Hodges also said McAfee had not decided yet whether to target higher operating margins in fiscal 2006. The company is on track to hit 25 percent margins in its current fiscal 2005, he said.


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