Mr. Fonseca, Network Associates Inc. was actually a result of a merger between McAfee and Network General, back in 1997. Since then, Network Associates has acquired several other companies. Can you give us a brief insight of today's Network Associates' structure and of its main product groups?
As you mentioned Network Associates was formed by the former McAfee Associates and Network General, using the first name and the last name of each company becoming Network Associates Inc. It is made up of four companies McAfee, Sniffer, PGP (from the encryption company - Pretty Good Privacy and Gauntlet), and Magic Solutions. They formed this alliance with PGP in order to provide information security. Magic is a company that sells help desk. If you see the picture of these four companies, the idea behind this is to have two main areas. One is security formed by McAfee, the antivirus, to protect security information and PGP, which is perimetral security encryption and intrusion detection. They have all this set of products to protect your information from external attacks. The other are is availability, formed for Sniffer to monitor your network and Magic to give you the Help Desk tools to minimize downtime.
So PGP is a complementary acquisition?
Yes, to have a complete set of solutions for security information. Antivirus is a part of security and you protect your information from a virus, so you're guaranteed that your information is secure, nothing will destroy it. To complement that, we acquired PGP, Gauntlet and the Cyber Cop, which is intrusion detection. So, with those two companies we have the security of information set. They are two different companies, with two different sets of products that complement each other. We are currently announcing new versions and new alliances for these products. In the case of our FireWall we include the antivirus, which is a necessity in any company nowadays and it is used to Scan the mail, which is a critical solution. We depend on the Mail 80 to 90 per cent of the time, you have to protect your mail. In that sense, McAfee and PGP are working to provide solutions: to scan the mail, clean it and give you the best mail solution.
Network Associates as the world's largest independent network security and management software company, decided in 1997 establish offices here in Mexico. What has been your motivation to expand to Mexico?
We started to work in Mexico in the early 90s with a representative. As it usually happens, the representative didn't have all the support from the company, nevertheless the results were very good. After '97, when the two companies merged, they decided to open a branch here in Mexico. We are a branch of the Company, we represent locally the four companies that conform Network Associates Inc. The idea behind this is to serve this market. Everyone was looking to Latin America, especially Mexico being the closest to the USA. We are expecting great growth in Mexico both from the government and the private sector.
Is Mexico a platform for you to operate not only in the domestic market but also on the rest of the Latin American continent?
No. We have a branch in Brazil and we have offices in Colombia, Chile, and Argentina and soon we'll have one in Peru. Every country has a different culture and idiosyncrasy. In Argentina we are working more with larger resellers or distributors with a sort of joint venture. In Brazil we have our own company, we even manufacture some products there due to government regulations. In Mexico, we are an independent branch that works with value added resellers and resellers associated to wholesale companies. Every country has a different model.
At the beginning of your operations in Mexico did you deal with the same line of clients and partners in this country as you do worldwide?
Yes, it's about the same model here in Mexico taking into account the local corporate and government market. Our corporate associate Network Associates, McAfee, owns the corporate market in antivirus. From that, we are moving to the area of smaller companies and retail.
But are you serving the same big players as your clients?
Yes, the same big clients. We have corporate contacts in different companies such as Ford Motors, General Motors. GM has a Delphi, which is our customer in the maquiladora area, which is very particular for the Mexican market. Sometimes we sell to them, sometime they buy from the USA, it's a mixture.
The 1HOO revenues of Network Associates increased 66% to about US$450 million and its net income totaled 40 million US$. Do these global figures reflect as well the situation in Mexico?
Today Mexico and Latin America as a whole, represents about 3% of the company's total which is a typical number for the industries of our kind. It varies seasonally. In Mexico seasons are different from the USA. The first quarter of the year is a slow one, the second quarter is very good, the third quarter slows down again and the fourth is usually the best quarter of the year. Brazil has different seasonallity because January is almost dead and summer is in different times.
Would you say this was an exceptional good year for Network Associates in Mexico?
It was a good year. We are improving our numbers compared with last year. We are restructuring the company in terms of account executives, new VAR's (Value Added Reseller), opening new channels and we are moving more towards the interior of the country. If you see Mexico, 80% of business is done around Mexico City and if you take the north that is centralized, in Monterrey you'll find 10 to 20 percent. And then you see some areas that usually buy locally but that amount is not very significant. With the new government, we are expecting more federalism, helping these state companies to have control over more companies. They will start buying more in certain areas so we are trying to prepare for open resellers to take care of this market. If you go to the southeast, Mérida, we have some business there or with Pémex in Tabasco, that area is also moving. We have a very nice industrial corridor that runs from Querétaro to Aguascalientes, which is moving and growing impressively. Besides, all the maquiladora area is something that is starting to look more and more into Mexico for products and services. Next year, I believe they'll be paying VAT, as any other company that will make these companies look to Mexico to buy products. In the past they used to look to the USA because they didn't have to pay any VAT.
In your opinion, as a member of the IT sector in México, how could the new administration support the development of your sector as one of Mexico's main development assets?
That's something hard to tell. I've been reading a lot lately that companies in the IT sector are slowing down in certain areas but we foresee a very interesting growth in the retail areas and home computer units. Companies are stabilizing because we are looking for the new companies that are coming to the country, that's the big business. In Monterrey, and I work half of the time there and half in Mexico City, you see one or two companies opening a month. It's the same with all these regions around Mexico City, such as Puebla, Querétaro. All this maquiladora industry coming to the interior to manufacture is an area where we see a lot of opportunity. Everybody is working with government groups today. Everybody sells to Pémex, Comisión Federal de Electricidad, Telmex, which are huge companies. That opportunity is being taken care of but the great opportunity comes with small to medium size companies. A lot of these grow around those big companies to provide services. They don't want to take care of everything so they are subcontracting a lot of tasks, so this is a great opportunity.
Those small and medium-sized companies are as well potential clients of your products, as you said. For example, of your McAfee anti-virus product which is the most successful of its kind in the world. Seventy million people use it worldwide. Is it also the most successful product line here in Mexico?
It represents for us around 50% of our revenue here in Mexico. We can say that the retail product is used by many but we don't have the real numbers because they don't buy a license. We are campaigning in order to convince people that viruses are a serious threat, and that especially an old antivirus-program is not the best solution, because they have to have the new releases and the new signatures every other week in order to be safe. The home user culture in terms of information security is low. In companies, we've been working with BSA (Business Software Alliance) to find out if they are using the pirate product. That is paying off. We are seeing more and more companies comfortable paying for the product and getting back the services they expect. In Mexico, services are not very well paid. Many think that if they buy the product, they will receive the services for free. Nowadays, services are more expensive than products in certain cases. What we sell are services for big companies because we provide updates, we help them to clean out when they have problems, we visit them and train them. | Nowadays, one of the main challenges you are facing, is the protection against e-mail borne viruses, as for instance the LOVE LETTER virus which caused around US$7 billion in damage last year. What can be done in order to prevent further damages to the worldwide economy by those viruses?
Right now we are working with the big ASPs and ISPs ( Application Service Providers and Internet Service Providers). We are offering solutions to implement all the infrastructure to cleanup all the e-mails for them. If you are in a company with a good antivirus infrastructure, you are pretty safe because the company has various tools to clean up mail. But if you are in a home, you need someone to clean up your mail. So we are working with the ASPs and ISPs to build up this kind of infrastructure. We see that as a very important way to help everyone. People in corporations have alternative e-mails (Prodigy, Terra), so there are many ways of being infected. One of the things we are trying to do with these companies is making sure they clean up all the e-mail because e-mail virus will come from any source you can imagine.
In order to offer those improved services, Network Associates signed an agreement with Nokia a few days ago. Could you tell us something about the background of this cooperation?
It's not the first product we offer in this way, we have other joint ventures. What we are doing with Nokia is that they have the appliance, which is a piece of hardware and we are mounting the VirusScan, the WebShield, which is a way to clean up all the e-mail that is coming to you. Nokia did a very deep analysis of the products in the market and they chose WebShield in order to protect and sell it in a plug and play box. Most corporations will have one FireWall and one WebShield in order to filter every incoming file. In the future they will have some kind of encryption, they call it the VPNs, Virtual Private Networks, to communicate and make sure no one is seeing what is being sent by e-mail. But that was an interesting joint venture.
To keep up your leadership in the global virus security market, Network Associates has to invest heavily into research and development programs. What are your activities on this field in Mexico for this year?
Network Associates is spending more than 15% revenue in research and development. At the moment we have a tight budget for marketing and other areas because we are focusing in research and development. We have the largest virus laboratory worldwide.
In Mexico?
No, worldwide. This is a very interesting market because you have to have a lab that is working 24 hours a day. So, they divide people in different countries such as the USA, Japan, Europe and we have people in Mexico and Brazil. So, if you find a new virus, the findings are sent to the other labs. For example, they send the information to Japan, Japan keeps working on it and when the cure is found they send it back so we may update our systems for our customers and the next day, they will have the cure in their machines.
How many research labs do you have in Mexico and where are they located?
It's not a research lab per se. We have two people working together with the lab people. The concept of the antivirus lab is interesting because you have people with small labs where they start working and testing. It's not a densely equipped investment, it's more people analyzing what this virus does and how they can clean it up.
Do you consider the human resources situation here in Mexico satisfying or do you see a problem in finding skilled workforce?
My experience is that we have very good technical labor in Mexico. As a matter of fact, I've seen friends of mine in the past year going to the USA to work. We are now competing with very good technical labor and in the USA they have a deficit in technical personnel. I was in a farewell party last Friday for someone who was going to work to California. I know Mexicans working in Spain, Yugoslavia, England, the USA, and Canada. We have very good people in the area of software development.
Does Network Associates Mexico run its own training programs? For example, back in 1997, the company joined forces with CISCO Systems to prepare students for the demands enormous opportunities of the information economy. Has this project been implemented as well in Mexico?
The company is following what happens in the USA. Currently, we have our own training program for Mexico. In the past we had a big gap. Nowadays, if you have a new product or service, you will see it overnight in Mexico because if you don't get it here you just go to the USA and get it. What we are trying to do is to put to work what they have in the USA almost at the same time. We work very closely with the Dallas office and the Santa Clara office.
Do you have a student program in order to train potential future personnel?
Not here in Mexico. But we work with Universities.
Do you think that in the future Mexico could follow the development such countries as Ireland, India or Israel were experiencing on the IT field and becoming an IT leader in Latin America?
I see a pattern for that. You see companies such as GM that is moving its design center from Detroit to Toluca or other companies moving design centers from someplace in the USA to the US border. You see a large software factory in Monterrey and a lot of companies doing maquila software for other companies in the USA. We have a big advantage here with our privileged geographical location, we have the same time zone, a two-hour distance flight. You see more and more people taking software development jobs and a lot of products are coming from Mexico. I certainly see Mexico becoming the strongest software development and services force in the region.
One advantage of Mexico you forgot to mention is surely the global network of free trade agreements. The next one is supposedly the FTA with Singapore. Afterwards we are expecting the signing of a FTA with Japan and maybe with Korea. Do you expect a high number of clients coming from those countries and asking for your services?
Yes I do. When you see this kind of agreements, you'll see these companies flowing. I don't remember the number of companies coming from the Far East to Mexico but it's a huge amount of companies. So, we'll see the opportunity to provide services to these companies. We are more oriented to be a service provider here in Mexico. The product is coming from the USA and Europe and we sell locally. Mexico will be a natural port of entrance to the USA and Latin America. We will sign some agreements with other Latin American countries in the near future.
How can Network Associates benefit from these new opportunities in your opinion? Will it be the essential key factor to guarantee Network Associates leading position in a few years from now?
We plan to be there for a while. Our CEO was telling us that we are currently focusing in research and development but the company will buy other companies to add more products to our current line. One of the reasons I'm here is that I see a lot of opportunity in this market. Everyone will use an antivirus and security FireWalls to filter their e-mail traffic. And all of these incoming companies will be looking for services and help in order to work as well as they work in their countries. So we see a huge opportunity for us in this market and we are preparing for that. We are preparing more VARs, more executives. We opened an office in Monterrey, and soon we'll be in Guadalajara and the Southeast. |
