War is not a term to be tossed around lightly. That is why the growing debate over cyberwar has caught our attention.

The annual McAfee Virtual Criminology Report has traditionally focused on the methods, targets and behavior of cybercriminals. And yet, as we put together the 2007 report, numerous experts pointed out that nation-states were not only spying on each other in cyberspace, but also developing increasingly sophisticated cyberattack techniques. Since that report was published, we have seen the concept of cyberwar debated more often in the face of mounting attacks and network penetrations that appear to be motivated by political objectives instead of financial gain, making it a stretch to characterize them as cybercrime. We decided to revisit the possibility of war in cyberspace in this year’s report.

Experts disagree about the use of the term “cyberwar,” and our goal at McAfee is not to create hype or stoke unwarranted fear. But our research has shown that while there may be debate over the definition of cyberwar, there is little disagreement that there are increasing numbers of cyberattacks that more closely resemble political conflict than crime. We have also seen evidence that nations around the world are ramping up their capabilities in cyber space, in what some have referred to as a cyber arms race.

If cyberspace becomes the next battleground, what are the implications for the global economy and vital citizen services that rely upon the information infrastructure? What should those of us outside the military do to prepare for the next wave of cyberattacks?

Finding answers to these questions was not easy because much of this discussion is only happening behind closed doors. We believe this veil of secrecy around cyber warfare needs to be lifted. There is little doubt that the impact of cyberwar will extend beyond military networks. As our dependence on Internet technology grows, so does the need for thoughtful discussion on political conflict in cyberspace.

This year’s Virtual Criminology Report highlights the complexities and potential consequences that arise when political conflict goes online. Our hope is that the report will help encourage and frame a global dialogue on protecting our digital resources from the scourge of cyberwar.

Today, we announced our Q3 2009 results to Wall Street and delivered McAfee’s 15th consecutive quarter of double-digit, year-over-year revenue growth. It was another “triple double” quarter—achieving double-digit growth in revenue, operating cash flow and non-GAAP earnings-per-share.

In the third quarter:
• McAfee reported record revenue of $485 million for Q3 2009, an increase of 18% over the same period last year
• Corporate revenue grew 25% year-over year to a record $308 million, and we closed 31 enterprise deals valued over $1 million, the highest number of million dollar deals for us in a quarter
• On the consumer side, revenue grew 8% to $177 million
• In midmarket, we saw strong movement away from our competitors’ products to our Total Protection Suite, with a 53% increase in displacement sales
• We saw solid growth across the world in Q3 with North America revenue reaching a record $273 million and international revenue reaching a record $212 million

Our security product portfolio continues to lead the industry.  In Q3, we launched a new consumer online backup product, announced a new RiskAdvisor 2.0 product, and released Total Protection Service 5.0.  McAfee expanded our endpoint protection products for the Apple Mac platform as well as our McAfee Firewall Enterprise appliance product line with the HP BladeSystem.  During the third quarter, we also closed the acquisition of MX Logic and included their products into our product line. 

McAfee’s financial results for Q3 clearly show that we are seizing the opportunities to broaden our security footprint on almost every layer of the technology stack. Our “Silicon to Satellite” vision is winning in the marketplace.  The remarkable combination of our products, partnerships, strategy, and most importantly, our people, accelerates our drive to become the number one security vendor in the world.

We are focused and have a great outlook through the end of the year. We feel we are uniquely positioned to continue to expand our share of the market.

Regards,

Dave

Today we announced our second quarter 2009 financial results. These results demonstrate that, despite a challenging economic environment, our strategy is working. In addition, we are pleased to announce the acquisition of MX Logic, the leader in cloud-based security. This will help McAfee drive additional growth in the small and midmarket segments and creates the industry’s most comprehensive Security-as-a-Service portfolio.

With today’s acquisition, we reinforce our position as a leader in Security-as-a-Service and bring world class email and Web defense, including email archiving and continuity services, extending our proven expertise in providing cloud-based services to our customers.

In the second quarter of 2009, we continued to take market share from competitors and outpace the growth of other companies in our space. According to the results:

• Reported revenue was $469 million for Q2, up 18% year-over-year—a record revenue quarter and our 14th straight quarter of double-digit year-over-year revenue growth
• Deferred revenue reached a record $1.31 billion, up 20% over the same period last year
• Record non-GAAP operating income of $125 million, up 23% year-over-year
• Non-GAAP earnings per share is $0.60, up 15% year-over-year, which is a new record for McAfee
• Record results for each of our corporate and consumer businesses

Our financial results and market share gains continue to demonstrate that security is a must-have technology. Security is more important than ever, for protecting countries from cyberterrorism and cyberwarfare; for keeping companies operating securely, and making consumers’ digital lives safe. McAfee will continue to drive sales and build market share through an approach that bundles market leading solutions into suites; integrates management of this portfolio through our ePolicy Orchestrator management platform; and creates trusted advisor status with McAfee’s security-only focus and world-class service and support.

We will remain focused and look forward to a positive second half of the year.

Regards,

Dave

Today President Barack Obama recognized that cybersecurity of critical U.S. public and private infrastructure is essential to our national security and economic interests.

In a speech at the White House, which I was honored to attend, the president unveiled the highly anticipated 60-day Cybersecurity Review and declared that the country’s efforts to deter, prevent, detect and defend against cyberattacks would now be run by a new White House cybersecurity coordinator. The president also promised to take into account privacy rights and civil liberties.

This is a true a holistic approach which builds upon previous efforts. The White House is taking leadership on the issue by pointing out this is an issue which directly ties into national security, economic competitiveness, privacy rights/civil liberties, and law enforcement/public safety. Our hope is this effort will also add increased governance and accountability.

Government and private sector, including McAfee, actively collaborated on this initiative. The release of the 60-Day Cybersecurity Review marks just the beginning of a new era of US leadership in the critical field of cybersecurity.

We look forward to continued participation in an even stronger partnership with the government to ensure that our institutions and citizens are able to fully participate in a secure and networked world.

I am excited to announce another important milestone in our growth as the world’s largest dedicated security company.

Today, at our May 15th Investor Day meeting in New York City, we announced that we will acquire Solidcore Systems, Inc., a leading provider of dynamic whitelisting technology. Through this acquisition, we believe McAfee can expand its reach into new markets, secure new platforms and strengthen its hold as the leader in the $6 billion endpoint security market.

By continuing to innovate, McAfee stays one step ahead of our customers’ needs and our competitors’ offerings. With Solidcore, we will bring together best-in-class technologies and extend the current McAfee security portfolio beyond signature-based anti-malware. We will combine dynamic whitelisting and application trust technology with leading McAfee antivirus, antispyware, host intrusion prevention, policy auditing and firewall technologies, to help customers more readily mitigate the risks associated with vulnerable or malicious applications downloaded by employees.

Solidcore has strong financial results, is profitable and has a very good customer base. I see this as a win-win for our customers, partners and for Solidcore and McAfee.

Until next time,

Dave

This discussion may contain forward looking statements, which include statements regarding expected plans for the integration of Solidcore’s products and business, expectations as to the opportunities resulting from the acquisition of the Solidcore business, market trends, market positioning and strategy, business plans and expected results and benefits. 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.

Today we announced our first quarter 2009 financial results. These results demonstrate that, despite a challenging economic environment, our strategy is working.

In the first quarter of 2009, we continued to take market share and outpace the growth of other companies in our space. According to the results:
• Reported revenue was $448 million for Q1, up 21% year-over-year—a record revenue quarter and our 13th straight quarter of double-digit year-over-year revenue growth
• Record operating cash flow of $146 million, up 105% compared to the first quarter of 2008
• Record non-GAAP earnings per share of $0.57
• Record results for each of our corporate and consumer businesses

This financial stability is the platform on which McAfee is building industry leadership. Customers from the consumer to the largest enterprise see the value in our unique and comprehensive security solutions, which provide improved protection, increased manageability and better return on their security investments.

McAfee will continue to drive sales and build market share through an approach that bundles market leading solutions into suites; integrates management of this portfolio through our ePolicy Orchestrator management platform; and creates trusted advisor status with McAfee’s security only focus and world-class service and support.

We are focused and look forward to a positive 2009.

Regards,

Dave

According to Consumer Reports, U.S. consumers have lost close to $8.5 billion to cybercrime over the last two years. Unfortunately many people don’t know they have become a victim or even what cybercrime is. To help solve that problem, McAfee today launched the Cybercrime Response Unit (CRU), a free service that demystifies cybercrime and offers actionable advice to victims.

With physical crime you know right away if your house has been broken into or your car has been stolen, but with cybercrime, it’s not that obvious. Most people don’t even know they’re a victim, and they rarely know what to do next. The CRU is an online 911 that can triage your situation and direct you to recovery.

The CRU is part of McAfee’s Initiative to Fight Cybercrime. It is designed to help consumers and small businesses identify whether they have been victims of a cybercrime, and recommends next steps. The free service directs victims to appropriate law enforcement, credit agencies and other resources to address their situation.

A unique feature of the CRU site is a forensic scanning tool based on McAfee’s Global Threat Intelligence that assesses whether an individual has malware running on his or her computer or has visited malicious Web sites that may have stolen personal information. CRU agents will be available to assist victims by telephone in the most serious cases.

Aside from remediation of cybercrime, education is an important part of CRU. We want to help the victim to understand the types of risky online behaviors that can lead to cybercrime so that they can better avoid it in the future, and be empowered to use the Internet safely. Ultimately, educated users help us fight against cybercriminals.

In fall 2008, we launched our Initiative to Fight Cybercrime, a wide ranging effort aimed at closing critical gaps in this ongoing battle. The key components include awards, grants, reports, speeches by McAfee leaders, new products and an array of communications. McAfee remains dedicated to our work as both a thought leader and impact player in the fight against cybercrime.

Watch this video on CRU to learn more:

Today we announced our financial results for the fourth quarter and full year 2008. 2008 was a year of market leading results for McAfee-we delivered double-digit, year-over-year growth in key financial metrics, we took significant market share in all four quarters from our competitors and we continue to build on the foundation for the future of our company.

Even though we’re in a down economy, we continued to take market share and outpace the growth of other companies in our space.

For the year, we reported revenue of $1.6 billion, an increase of 22 percent compared to last year. Year-over-year corporate revenue grew 25 percent, consumer revenue grew 18 percent and we delivered double-digit growth in all five geographies and across all product segments.

We maintained a strong cash position and used our balance sheet to invest in new and existing distribution channels worldwide and diversify our product portfolio. These investments combined with our go-to-market strategy position us well to meet challenges and pursue opportunities we see in 2009.

In 2009, we plan to harvest these investments-leveraging our consumer model, acquisitions and delivering on our vision of integrated security across the endpoint, the network and the “cloud.” We will also continue to take steps to reduce our costs, with initiatives that we anticipate will result in $50 million in cost savings and cost avoidance.

I remain convinced that McAfee will emerge from the downturn stronger than ever and we remain focused on driving toward our goal of becoming the number one digital security vendor in the world.

Cheers,

Dave

This discussion may contain forward looking statements, which include statements regarding market trends, market positioning and strategy, business plans and the expected results and benefits.  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.

At Davos this week, I’ve had the opportunity to speak with world leaders about the most pressing issues of the day.  Among the issues we’ve been discussing is the true cost of cybercrime, and the incredible drag it’s creating on the global economy.  To underscore that point, we just announced the results of the first research to look into how the global economic downturn is affecting corporate data loss.

There are a couple of factors that have created a perfect storm for the challenges we’re seeing.  Some have been in the making for quite some time, others are more recent.

For those who have read The World is Flat, by Thomas Friedman, you understand the forces that are driving companies to store higher percentages of critical data offshore.  With cheaper labor forces, you’ve got an extended supply chain that creates new challenges.  With the world flattening, it’s created a perfect storm for data loss.

We continue to see major data breaches, such as Heartland, that are causing major damage to stock values and corporate reputations.  We’re seeing a dramatic change in the landscape with IPv6, triple-play to the home, and connected devices.  Now, basically anything with an IP address can be attacked by the bad guys.  Cybercrime groups are growing increasingly sophisticated and more distributed globally, and it’s very difficult to track them down and trace them.

Massive layoffs are exacerbating the situation, particularly when the layoffs are global and we don’t have equal intellectual property protection around the world.  When employees leave a company, it creates another scenario where they take data or unwillingly compromise data.  They have portable information on phones, laptops and at home.

Our Unsecured Economies Report shows that the loss of intellectual property, such as trade secrets, to be one $1 trillion or more annually.  This dollar amount is calculated based on the cost of data breaches resulting from theft by cybercriminals, or deliberate and accidental loss by employees. When you put a trillion dollar force against our economy right now, that is a significant headwind.  We see this as a growing challenge over the next few years, and McAfee will stay on the forefront of helping companies fend off these challenges.

At McAfee, we are relentlessly focused on tackling the world’s toughest security challenges, and we will continue to help businesses secure their systems and networks around the world.

2008 has been a banner year for McAfee and I’m very proud of what we have accomplished.  We have continued to fight for a noble cause: protecting our customers from the bad guys and looking for new ways to stay ahead.  There have been so many things to be proud of that it’s hard to know where to start, but here are a few corporate highlights.

We’ve continued to build our leadership through acquisitions and this year made two major additions to our portfolio.  We acquired Reconnex, a leader in the data protection market, which provided McAfee with unique technology that learns and adapts to automate the ongoing protection of data.

We also acquired Secure Computing, and in doing so became not only the undisputed leader in network security, but cemented our leadership as the world’s largest pure-play security provider.

On the product side, we’ve continued to innovate, announcing the world’s first unified approach to solving the complex Network Access Control (NAC) problem, linking endpoint and network security with access control and compliance, all centrally managed by McAfee ePolicy Orchestrator.

At the same time, we continued to establish ePO as a critical piece of security management architecture with more than 30 partners joining our Security Innovation Alliance.

We held our first-ever user conference, FOCUS 08, which was a smashing success with more than 1,200 attendees from 47 countries.  At the conference we announced major partnerships with HP, Intel and VMWare to deliver security with PC hardware, networking components and virtualization software.  We also unveiled a major initiative to fight cybercrime which will continue to guide our efforts throughout 2009.

We have been very fortunate this year and have worked hard to sell products even during challenging economic times.  We reported record revenue of $410 million for the third quarter of 2008, representing 27% growth year over year.  We’ve been successful this year, in part, because our customers recognize that security is not a luxury, and as the economy worsens it’s even more critical that they actively protect their information assets.

Finally, just this week, McAfee was listed on the S&P 500.  This is a significant achievement for our company, our employees, our customers and our shareholders.

We will continue working together to deliver even greater shareholder value in 2009.

Wishing everyone a happy and SAFE holiday season,

Dave