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The discovery was made during an internal investigation of the company's books, according to a statement released by NA. Its accounting practices for 2000 are also under investigation, though NA chief executive officer George Samenuk called the two matters "unrelated" on a conference call held yesterday morning.
NA said that it did not expect to have to restate any of its 2001 or first quarter 2002 figures, and that its day-to-day operations were unlikely to be affected.
Samenuk said the company would report more details in two to three weeks' time.
As a result of the revelations, NAI announced that it would withdraw its offer of 0.78 shares of NA stock for each outstanding share of McAfee.com stock.
McAfee.com shareholders had until yesterday to vote on whether to approve the buyout or not, though the board had already voiced its approval. NA owns 75% of McAfee.com.
Samenuk said that the problems were discovered "in the course of preparing a routine tax filing" and are still being investigated to determine their full scope. "We do not, at this point, have a clear understanding of all the facts," he added.
The McAfee.com offer had to be pulled because McAfee.com shareholders need to have an accurate view of NAI's financial records to make their decision on the proposed deal, he said.
The buyout process has been a start-and-stop affair. McAfee.com had rejected NA's original offer of 0.675 shares in late March. The day after that rejection, NA announced the accounting investigation and postponed the acquisition. However, three days after that NA announced that it would resume its bid
Despite the disruption of the deal, McAfee.com will not be affected, insisted Srivats Sampath, chief executive officer of McAfee.com.
Sampath also said he does not expect that NA will attempt another buyout of the company any time soon. "I'd be mildly irritated if [NAI] came back in the next couple of weeks and said they wanted to do it again," he said.
Kent Roberts, executive vice-president and general counsel of NAI, said: "We are withdrawing the offer and we are going to clean up matters here."
McAfee.com originated as a part of Network Associates and was spun out as a separate company in 1999. Despite the irregularities in NAI's 1999 accounting, McAfee.com chief financial officer Evan Collins said that he did not expect that the problems would affect McAfee.com's past financial statements.
The executive team running Network Associates has been in place since the beginning of 2001. The previous team, which ran the company in 1999 and 2000, resigned en masse in late 2000.