McAfee (MFE)

Q2 2010 Earnings Call

July 29, 2010 4:30 pm ET


Kate Scolnick - Vice President, Investor Relations

David DeWalt - Chief Executive Officer, President and Director

Jonathan Chadwick - Chief Financial Officer


Keith Weiss - Morgan Stanley

David Hafner - JP Morgan Chase & Co

Gary Spivak - Noble Financial Group

Brent Thill - UBS Investment Bank

Philip Winslow - Crédit Suisse AG

Walter Pritchard - Citigroup Inc

Steven Ashley - Robert W. Baird & Co. Incorporated

Daniel Ives - FBR Capital Markets & Co.

Rob Owens - Pacific Crest Securities, Inc.

Ryan Lee - ISI Group Inc.

Stephanie Withers - Goldman Sachs Group Inc.

Todd Raker - Deutsche Bank AG

Michael Turits - Raymond James & Associates



Good afternoon, ladies and gentlemen. My name is Fia, and I will be your conference operator today. At this time, I would like to welcome everyone to the McAfee Second Quarter 2010 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Scolnick. Ma'am, you may begin.

Kate Scolnick

Thank you. Good afternoon, and thank you for joining us today for McAfee’s Second Quarter 2010 Conference Call. With me today are McAfee President and Chief Executive Officer, Dave DeWalt; and McAfee Chief Financial Officer, Jonathan Chadwick. You will find in our press release and on our Investor Relations website, a GAAP to non-GAAP reconciliation of the second quarter 2010 financial results as discussed in this conference call. The link is, and our results are posted under Quarterly Results. We are providing a slide presentation during today's call and we will post these slides along with our prepared remarks to the website following the conclusion of today's call. For your reference we will be providing a rule of thumb for our foreign exchange assumptions during today’s call and this will be posted to our website following the call.

During this conference call and the question-and-answer session, we will make forward-looking statements regarding future events and the future performance of the company, including our guidance on revenue; operating income margins and earnings levels for the third quarter of 2010; the assumed tax rate for 2010 we used in estimating our guidance; our strategies and opportunities; trends in the security market; our competitive position and momentum; the anticipated benefits of our current, new and future products; and the anticipated benefits of our acquisitions, partnerships and alliances.

Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties. We caution listeners that actual results may vary, perhaps materially, from the forward-looking statements made during this call and the question-and-answer session this afternoon. We encourage listeners to review the risk factors contained in today's press release, as well as the company's filings with the SEC, including the Form 10-Q filed May 7, 2010, for more detailed information on the risks and uncertainties related to the company and its business. We do not undertake to update any forward-looking statements.

Our guidance as to revenue, operating income margins and earnings levels discussed during this conference call, and the question-and-answer session replaces and supersedes any previous guidance with respect to future periods and is valid as of today only.

At this time, it is my pleasure to turn the call over to Dave DeWalt.

David DeWalt

Okay, thank you, Kate. Good afternoon, and welcome, everyone. Thanks for joining us for our call today. Before we really get started, let me start things off with officially introducing and welcoming our new CFO, Jonathan Chadwick. As many of you saw, Jonathan came on board about 45 days ago and personally, I cannot be more pleased to have him on our team. And as expected, he's really hit the ground running. Jonathan brings a very unique set of skills to our management team after 13 years at Cisco in a number of key management roles and a focus on M&A and strategy for their company. Jonathan, you want to say a few words before we get started?

Jonathan Chadwick

Sure. Thank you, Dave, for that really warm welcome. I’m truly excited to be here today as part of the McAfee team. I really do see this as being a great time to be at McAfee and in the security technology market. This has been a great month or so and I want to thank all the McAfee team members that have made me feel so welcome from day one. And I'm also looking forward to working with many of you within our shareholder community over the coming months.

David DeWalt

Welcome, Jonathan. I'll practice your accent. All right, well let's get started. Q2 was a really challenging, emotional, but really rewarding quarter, probably the most I've had in my career. In the face of some very difficult adversities, McAfee emerged stronger than ever, and I for one am very optimistic, more optimistic than ever while I've been here at McAfee.

Today, I'd like to discuss and comment on five major themes that capture the essence of the opportunity and the optimism I see in the market and for the company. First, I see continued improvement in the macroeconomic conditions for IT. We’ve seen multiple successive quarters of improvement in spending, in most segments worldwide. This, coupled with the dramatically improving market expansion for security endpoints creates a strong positive business dynamic for McAfee.

In addition, McAfee managed to overcome significant adversity and turn this into a market advantage through focused Q2 initiatives. As a result, I believe McAfee, in one of its best quarters in years as highlighted by exceptional execution in bookings, operating expenses, big deal contracts, major PC OEM extensions, new partnerships and outstanding cash flow from operations. I believe the future never looked brighter as we're now set to drive market share growth for years to come.

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