Updated from 5:09 p.m. EDT



, the Internet spinoff that majority owner

Network Associates

(NET) - Get Report

is seeking to acquire, reported second-quarter earnings and revenue that were above estimates.

McAfee reported GAAP net income of $6.4 million, or 13 cents a share, in the second quarter, compared with a net loss of $134,000, or break even on a per share basis, in the same period a year earlier.

Sunnyvale, Calif.-based McAfee said excluding charges, it earned pro forma net income of 10 cents a share, compared with 3 cents a share a year earlier. The company said revenue rose 43.8% to $20.7 million from $14.4 million a year earlier and 10.1% from $18.8 million in the previous quarter.

Wall Street analysts were expecting McAfee to earn 7 cents a share on $20.6 million in the second quarter, according to Thomson Financial/First Call.

McAfee reported that new subscribers acquired in the second quarter totaled 155,000, compared with 101,000 gained in the first quarter.

In its conference call after the market closed, McAfee said third quarter revenues would be near consensus estimates of $22 million, with earnings of 10 cents per share. It expects fourth quarter sales to be between $23 and $24 million, with earnings remaining at 10 cents. The company expects operating margins to be 31% to 32% for the second half of the year.

The company said it would announce more details soon regarding its June 29 agreement with



to bring to market a co-branded anti-virus service. It also said it had extended an agreement to be the security vendor for


(MSFT) - Get Report

for another two years. MSN subscribers will now receive a trial version of McAfee's antivirus service when they upgrade to the next version of MSN via a CD-ROM scheduled to be released later this year.

On July 1, Network Associates announced its third bid to buy the 25% of McAfee that it doesn't already own. The company offered to pay .78 of a share of Network Associates for every outstanding share of McAfee common stock in a deal valued at $180.4 million based on June 28 closing prices.

That was the same sweetened exchange ratio previously offered by Network Associates and was a slight premium over McAfee's June 28 closing price. But it is lower than the last offer worth $224 million because Network Associates' stock price has fallen.

A special committee of McAfee's board is reviewing the offer. Network Associates abandoned its previous attempt to buy back McAfee, which it spun off during the dot-com boom to sell security software via the Internet, because it was forced to restate financial numbers. Network Associates is still being investigated by the

Securities and Exchange Commission


Shares of McAfee dropped 32 cents, or 2.3% Wednesday to close at $32.85, while shares of Network Associates fell 50 cents or 2.8%, to close at $17.70