Lighting a Fire Under Network Associates

Here's why the software company's stock is making a comeback. Plus, items on toys and fertility, Apple and broken wrists.
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The last time shares of Network Associates (NETA) popped, in July, it was because of takeover rumors that never materialized. This week's surge was based on something more substantial: An upgrade by an analyst who'd long been negative on the software company. The next catalyst for Network Associates, however, is likely to be the filing of initial public offering papers for its McAfee.com unit.

First, the analyst. Christopher Stix covers networking products companies for

SG Cowen

in Boston. Last year he smacked

Cisco

(CSCO) - Get Report

and Network Associates, formerly known as

McAfee Associates

, at roughly the same time. The Cisco call had its limitations -- as Network Associates Chairman and CEO William Larson reminded Stix during a well-attended conference call then, a shocking putdown by a CEO to an analyst who follows his company.

The NETA call, however, was more accurate, as shares of the software maker plunged from more than 67 toward the end of last year to as little as 10 in April, after the company began unstuffing its clogged inventory channel.

Stix showed Monday that his former call wasn't personal, by being the first on Wall Street to begin recommending Network Associates again. "This is a cheap software stock," says Stix, who guesses that investors willing to stick around a year should able to make money. His price target is 23, compared to Tuesday's close of 16 7/8. The stock stood at 15 9/16 when Stix upgraded.

Stix bases his upgrade on better-than-expected results for Network Associates' antivirus and other network-management software. The barely spoken but potentially lucrative boon to the stock, however, is the expected IPO of McAfee.com.

When CEO Larson started bragging last year about how McAfee.com would have its own IPO, it sounded like a slap-a-dot-com-on-it-and-call-it-an-Internet-company maneuver. No longer. Network Associates has built the site into a strong Web company under the direction of Netscapee Srivats Sampath.

Sources familiar with McAfee.com's plans say the site will market itself to investors as a consumer "application software provider," taking advantage of one of Silicon Valley's latest buzzwords. In other words, McAfee.com is a place computer users can "rent" applications like virus scanning software or programs that suggest ways to clear out chunks of a computer's memory.

McAfee.com is mum on its number of registered users and its IPO plans. That's usually a sure sign an IPO is imminent.

Fertile Toys

Thanks to all who wrote to point the obvious reason why

eToys

(ETYS)

would want the right of first refusal to purchase two domain names owned by

PlanetRx

, fertility.com and infertility.com, as

noted here Monday. eToys, the online retailer that made life difficult for former

Toys R Us

(TOY)

CEO Robert Nakasone, earlier this year bought

BabyCenter

, a content and commerce site for parents (if Netties could figure out how to sell directly to babies, they surely would). BabyCenter already supplies information on fertility and lack thereof, but these specific sites remain in the hands of PlanetRx.

Less clear still is what exactly eToys or BabyCenter hope to do in the fertility businesses or how it acquired the right of first refusal. "Until we're ready to talk about the direction of the business, we're not going to discuss this," says an eToys spokeswoman, in a tone snippy enough to make even a hardened columnist squirm -- the toy business is apparently not all that cuddly. "You're trying to dig up something we're not in a position to talk about."

Incidentally, Michael Prozan, a frequent (but seldomly quoted) adviser to this column and a onetime lawyer for the

Securities and Exchange Commission

, wrote to defend PlanetRx's decision not to explain how eToys acquired that right of first refusal.

"They've got a registration statement on file, and their public statements should be through this registration statement," writes Prozan, who adds that any hint of trying to hype the stock by talking to the news media could cause the SEC to delay PlanetRx's hoped-for initial public offering.

Poppycock, Mike. The offering process allows institutional investors to attend closed-door meetings where they can read body language the SEC never could decipher. If the investing public -- or, its proxy, the media -- wants a clarification on something in a filing, the company should be allowed to give it.

Of course, if the SEC wants to know more, it's likely anyone else who cares will see more about this soon. "If you're onto something," writes Prozan, "your measure of success will be that they put it into their next amendment to the registration statement."

Personal Stuff

Part I:

I've never met her, but my heart goes out to the

Trading Goddess

, who broke her

wrist while inline skating (no product placements in this column) last weekend. Last year at this time I too was in a cast with a broken wrist earned playing basketball in the parking lot at the

San Jose Mercury News.

Good news, TG: I hardly notice the injury these days.

The episode does remind me, however, of a column I dictated to a colleague (and fellow ballplayer) at the paper because my fingers were too swelled to type. The piece opined that just because

Apple Computer

(AAPL) - Get Report

had recovered didn't mean its stock would soar more than it already had, to around 42 then from 13 at the end of 1997. That was a good call for a while, as Apple's stock languished below 40 until this spring. That's all changed, of course. Apple's shares surged 3 3/16, or 5%, Tuesday to 65 1/4, buoyed by a justifiably enthusiastic speech by "interim CEO" Steve Jobs and the introduction of a new desktop computer.

Apple and its stock are back in form. So too will be the Trading Goddess' wrist.

Part II:

During a spate of violent acts at my university more than a decade ago, protesters held a vigil whose theme was to "Take Back the Night." In other words, make it safe again to walk around campus at nighttime.

So I detected the gallows humor when a dear friend from those days, now a high-powered management consultant, phoned around 6 p.m. recently just to say hello.

"What are you doing home so early?" I ask.

"It's my campaign to 'take back the night,'" answers the friend, whose identity is being hidden to protect the innocent.

Words for workaholics and their bosses to live by.

Part III:

Kudos to Michael Kwatinetz, lead tech analyst for

Credit Suisse First Boston

, for the most original explanation for the recent advance in

Microsoft's

(MSFT) - Get Report

stock price, from around 82 in mid-August to 92 9/16 Tuesday. No, it's not the imminent arrival of Rick Belluzzo (

James J. Cramer's

favorite

explanation). And no, it's not Microsoft's victory over

Sun Microsystems

(SUNW) - Get Report

in court.

"The real reason for the recent rise in Microsoft stock," Kwatinetz writes in his most recent

SoundBytes

newsletter for clients, "may have something to do with a new employee who started Monday, my son Matthew."

That's called being a proud dad and mensch while disclosing a potential teensy-weensy conflict of interest at the same time. Kwatinetz, a perma-bull on Microsoft, maintains a strong buy on the stock.

Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.