Strong Third Quarter Financial Results For McAfee (by Dave DeWalt)

Today, McAfee reported excellent Q3 financial performance with strong results across nearly all areas of our business. We’re proud to report:

– Q3 revenue of $523 million, up eight percent year-over-year
– Q3 deferred revenue of $1.4 billion, up eight percent year-over-year
– Year to date operating cash flow of $431 million, up 23 percent year-over-year
– Q3 non-GAAP earnings per share of 67 cents, up 9 percent year over year

In Q3, our corporate business continued its strong growth with revenue of $324 million, a five percent increase year-over-year.  McAfee closed 525 deals greater than $100,000 in value – a record, including 33 deals greater than $1 million.

Our consumer business also performed very well, reaching record revenue of $199 million for the third quarter, up 13% year over year.  Our OEM relationships continue to pay off and our direct online business had its eleventh consecutive quarter of double digit year-over-year growth.

McAfee’s strong performance in Q3 was in conjunction with what I believe is one of the most exciting developments in the company’s history. As you know, on August 19 we announced that McAfee has agreed to be acquired by Intel. I’m very excited about the expanded opportunities McAfee will have as part of the Intel family. This transaction fits perfectly with our vision of ubiquitous security and is expected to accelerate innovation at McAfee and ultimately make the digital world a safer place.

The proposed combination of Intel and McAfee will be about helping provide greater protection and efficiency to endpoint, mobile, and embedded devices by bringing software and silicon together to do the heavy lifting. We are not moving away from our core security business of software-based endpoint protection and network security technologies but instead intend to improve security for all customers by providing integrated hardware and software solutions.

There are three critical areas of focus:

1) Mobile and Embedded Device Security: Connected devices such as copiers, smart meters, medical devices and others require optimized protection with a lower memory footprint and low CPU utilization, such as whitelisting.

2) Security Moving Down the Stack: We expect the combination of software and silicon to create the next generation of security technology, following a path similar to the one virtualization technology has taken over the past decade. We will be able to utilize the silicon to enable the security software and provide better performance and higher efficacy.

3) Managing Security: With McAfee, Intel is acquiring ePolicy Orchestrator, the industry’s leading security management platform, which gives enterprises the capability to centrally manage security across a myriad of devices using a single console.

In addition, it is important to understand that McAfee will be a standalone, independent subsidiary of Intel and continue to operate without interruption and with autonomy. This means a continued focus on multi-platform and multi-device support. McAfee and Intel have been working together for some time already and we look forward to introducing the first products from our strategic partnership next year.

I am very proud of our accomplishments in Q3 and very excited about our future.  We continue to drive our growth with industry leading solutions, a world class workforce, and the strongest partner relationships in our history.


This discussion may contain forward looking statements, which include statements regarding McAfee’s preliminary results for the quarter ended September 30, 2010, the anticipated benefits from McAfee’s acquisition by Intel, the security market, the demand for and value of McAfee’s security solutions, and McAfee’s strategy, market leadership and positioning for continued market share gains.  These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements.  Additional information concerning these risks and uncertainties can be found in McAfee’s most recent periodic reports filed with the U.S. Securities and Exchange Commission. McAfee assumes no obligation to update any forward-looking statements.

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