UPDATE 3-McAfee reports lower 1st-qtr net as spending rises

(Adds comments from CEO and analyst.)

By Jim Finkle

BOSTON, April 24 (Reuters) - McAfee Inc (MFE.N: Quote, Profile, Research, Stock Buzz), the world's second-largest security software maker, posted a steeper-than-expected 27 percent drop in quarterly profit on Thursday as it increased spending on product development and marketing to boost share.

First-quarter net income dropped to $31.6 million, or 19 cents a share, from $43.4 million, or 27 cents a share, a year earlier. Three months ago, the company forecast first-quarter income of 24 cents to 29 cents per share on revenue of $345 million to $360 million.

Profit excluding special items was 43 cents a share, below the 45 cent average target by analysts, according to Reuters Estimates.

Revenue rose 17 percent to $370 million, beating the average analyst estimate of $352 million but far short of market leader Symantec Inc's (SYMC.O: Quote, Profile, Research, Stock Buzz) revenue of $1.5 billion in its most recent fourth quarter.

"My goal is to be the number one security vendor. There is just no other way about it," McAfee Chief Executive Dave DeWalt said on a conference call.

DeWalt said he hired new sales managers, 60 new sales representatives and improved product offerings during the quarter, adding the investments would pay off over the long term.

He said that contributed to an increase in operating expenses to $226 million from $203 million.