(FORTUNE Magazine) – Network Associates spent almost two years cobbling together no fewer than 19 acquisitions into a network-security software company that reached nearly $1 billion in annual sales. Then its market shifted. Revenues plunged and so did the stock price, falling from more than $60 in 1998 to about $10 last April.

Now, in a clever adaptation to the strategic and financial zeitgeist, Network Associates is retooling itself as a set of independent companies rather than a software conglomerate. The result: an opportunity for investors to catch a wave that could get bigger each time Network Associates rejiggers its corporate portfolio.

By carving out smaller niche firms in tune with what investors want, the company is justifying its past buying spree. Consider the newly public McAfee.com. Once little more than a stale product line with a dot-com label, McAfee.com has metamorphosed into a consumer-focused online service where computer users pay $29.95 annually for access to antivirus software, software updates, and information on equipment maintenance. After signing 1.6 million unpaid subscribers during 1999, McAfee.com persuaded 200,000 to pay up in the past four months of the year. Its goal is to convert more freeloaders into paying customers, then sell them additional products, including some that other PC-oriented vendors will pay McAfee.com to market.

Luring such an audience comes at a price, of course. McAfee.com's marketing expenses--such as a new agreement to advertise on AOL--are nearly as large as the site's revenues. In the fourth quarter alone, it lost $6 million on $8.4 million in sales. Yet investors aren't put off by the red ink. They're focused on the site's hypergrowth (revenues are quadrupling year over year) and gross margins worthy of a healthy technology concern (65%).

Given that McAfee.com barely existed within Network Associates a year ago and that the parent retains 83% of the dot-com's shares, Network Associates has added a huge asset to its balance sheet. McAfee.com is worth about $1.5 billion at its recent price of $35, up from its December offering price of $12.

And McAfee.com isn't the only successful carve-out. Closely held MyCIO.com, which offers online network security and diagnosis services to businesses, launched on the last day of January, and on Feb. 10 introduced a timely new service, Cybercop Zombie, to help Websites detect hacker attacks. The parent's market value grew $830 million in two days.

Even after that jump, Credit Suisse First Boston analyst Michael Kwatinetz recently noted, Network Associates stock still trades at "a severe discount for a software company returning to health." He rates the shares a "buy," but offers no price target.

By creating more carve-outs, Network Associates aims to emulate the success of venture firms, such as CMGI and Internet Capital Group, that invest only in Internet applications. In addition to McAfee.com and MyCIO.com, Network Associate's "portfolio" includes four other software firms: McAfee (antivirus programs), Magic Solutions (customer support), Sniffer Technologies (network analysis), and PGP (security). And Network Associates is nurturing these business units, spending $148 million in R&D in 1999, largely to add to its collection of software products aimed at large corporations.

Each newly formed unit must pass a series of tests before the parent company will consider floating its shares publicly, says Network Associates chief operating officer Peter Watkins. For example, Watkins says the white-hot network-security businesses must hit 40% to 50% annual growth, while the more mature antivirus unit needs to be in the 15% to 20% range. Watkins suggests that anything less would fail to excite investors and, obviously, would not warrant an IPO.

The best evidence that Network Associates' approach is working: Others are following suit. Valley stalwart Oracle is a partner in two new e-commerce businesses--GlobalNetXchange for retailing and Auto-xchange for cars--for which it vows eventual IPOs. And Excite@Home and Dow Jones are using the same playbook with their new joint venture, Work.com.

"If this model works, then we're basically leveraging" the investments Network Associates has made in companies and new technology, says Srivats Sampath, CEO of McAfee.com. "The nice thing is that you've got six engines pulling instead of one fat engine pulling."

ADAM LASHINSKY is the Silicon Valley columnist for TheStreet.com. You can browse his columns at www.fortune.com/investor/wired.