Over the past year, there have been few companies I less enjoyed analyzing than Network Associates
Absent reliable historical numbers, it is tough to say with any certainty how well a company is doing. For instance, if you look at Network Associates' historical performance according to its restated filings, the company appears to have had positive free cash flow for the past three years. But that was not always the case. If, for example, you looked at the same information on the company in August of last year, before the restatement came out, you would have thought the company was in the red for most of the past five years.
Coincidence? Don't bet on it. Sadly, I threw up my hands in disgust and never wrote a piece on this story, as I had intended months ago. But the upshot of that never-written piece was that Network Associates' restatement conveniently pushed a lot of its losses into the distant past and shifted a lot of its profits into the years that show up on a simple Yahoo!
As a result, anyone who looks at the company now sees a much different picture than someone who looked at it just a few months ago. The picture then was of a basket case, with negative free cash flow, an ongoing Securities and Exchange Commission investigation, and opaque financials due to be rewritten at any moment.
But today, a couple of restatements later -- poof! -- the company has transformed itself into a profit-making machine, with positive free cash flow for the past three years. The SEC investigation and profitless years are already fading into the mists of time. Why, the company is even changing its name to McAfee. Pretty soon, it will be as if the bad years had never happened.
I can almost hear tomorrow's investors talking now: "Network Associates? Yeah, I remember they had some troubles. But they don't even exist anymore, do they? Now McAfee -- there's a real winner."
It almost sounds like a turnaround story. Except every time I replay that conversation in my head, the words WorldCom and MCI keep getting dubbed in.
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Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.
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