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Symantec 10-K 2009 Documents found in this filing:Table of Contents
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Commission File Number
000-17781
SYMANTEC CORPORATION
Registrant’s telephone number, including area code:
(408) 517-8000
Securities registered pursuant to Section 12(b) of the
Act:
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Exchange
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2 of the
Exchange Act. (Check one):
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Aggregate market value of the voting stock held by
non-affiliates of the registrant, based upon the closing sale
price of Symantec common stock on October 3, 2008 as
reported on the Nasdaq Global Select Market: $14,129,454,929.
Number of shares outstanding of the registrant’s common
stock as of May 1, 2009: 817,831,058
Portions of the definitive Proxy Statement to be delivered to
stockholders in connection with our Annual Meeting of
Stockholders for 2009 are incorporated by reference into
Part III herein.
SYMANTEC
CORPORATION
FORM 10-K
For the Fiscal Year Ended April 3, 2009
“Symantec,” “we,” “us,” and
“our” refer to Symantec Corporation and all of its
subsidiaries. Symantec, the Symantec Logo, Norton, and Veritas
are trademarks or registered trademarks of Symantec in the U.S.
and other countries. Other names may be trademarks of their
respective owners.
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The discussion below contains forward-looking statements, which
are subject to safe harbors under the Securities Act of 1933, as
amended (the “Securities Act”), and the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking statements include references to our ability to
utilize our deferred tax assets, as well as statements including
words such as “expects,” “plans,”
“anticipates,” “believes,”
“estimates,” “predicts,”
“projects,” and similar expressions. In addition,
statements that refer to projections of our future financial
performance, anticipated growth and trends in our businesses and
in our industries, the anticipated impacts of acquisitions, and
other characterizations of future events or circumstances are
forward-looking statements. These statements are only
predictions, based on our current expectations about future
events and may not prove to be accurate. We do not undertake any
obligation to update these forward-looking statements to reflect
events occurring or circumstances arising after the date of this
report. These forward-looking statements involve risks and
uncertainties, and our actual results, performance, or
achievements could differ materially from those expressed or
implied by the forward-looking statements on the basis of
several factors, including those that we discuss under
Item 1A, Risk Factors. We encourage you to read that
section carefully.
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PART I
Symantec is a global leader of security, storage and systems
management solutions to help businesses and consumers secure and
manage their information. We conduct our business in three
geographic regions: Americas, which includes United States,
Canada, and Latin America; EMEA, which includes Europe, the
Middle East and Africa; and Asia Pacific Japan (“APJ”).
Our delivery network includes direct, inside, and channel sales
resources that support our ecosystem of more than 40,000
partners worldwide, as well as various relationships with
original equipment manufacturers (“OEMs”), Internet
service providers (“ISPs”), and retail and online
stores. We provide customers worldwide with software and
services that protect, manage and control information risks
related to security, backup and recovery, storage, compliance,
and systems management.
Founded in 1982, Symantec has operations in more than 40
countries and our principal executive offices are located at
20330 Stevens Creek Blvd., Cupertino, California 95014. Our
telephone number at that location is
(408) 517-8000.
Our home page on the Internet is www.symantec.com. Other
than the information expressly set forth in this annual report,
the information contained, or referred to, on our website is not
part of this annual report.
Symantec’s strategy is to provide software and services to
secure and manage the connected, information-driven world of our
customers against more risks at more points, more completely and
efficiently than any other company. We help individuals, small
businesses, and global organizations ensure that their
information, technology infrastructures and related processes
are protected, managed easily and controlled automatically,
independent of devices, platforms or locations.
We operate primarily in three diversified markets within the
software sector: security, storage and systems management. The
security market includes mission-critical products that protect
consumers and enterprises from threats to electronic
information, endpoint devices, and computer networks. Over the
past year, we have seen a continued rise in the volume of
security threats. Whereas attackers used to mass-distribute a
threat to thousands or millions of targeted machines,
today’s attackers often send individually crafted attacks
to each victim. Attackers are also targeting users with
social-engineering attacks, such as phishing websites that steal
financial information, passwords and other personal data. The
Internet has become the primary conduit for attack activity with
hackers funneling threats through legitimate websites, placing a
much larger percentage of the population at risk than in the
past. Security continues to be a top priority for enterprises as
information security is increasingly linked to regulatory
compliance.
The storage software market includes products that manage,
archive, backup, and recover business-critical data. Key drivers
of demand in this market include the increasing volume of
information that organizations of all sizes must manage, which
is doubling every two years, the need for data to be protected
and accessible at all times, and the need for a growing number
of critical applications to be continuously available. Other
factors driving demand in this market include the increasing
pressure on companies to lower storage and server management
costs while simultaneously increasing the utilization,
availability levels, and performance of their existing
information technology (“IT”) infrastructure.
The systems management market includes products that control the
IT environment by streamlining efforts associated with
deploying, managing, patching and remediating enterprise client
and server assets. The drivers for demand in this market include
customers’ desire to automate management tasks, to ensure
business productivity and to reduce IT costs and complexity.
We believe that the security, storage and systems management
software markets are converging as customers increasingly
require our help in mitigating their risk profiles and managing
their storage solutions in order to secure and manage their most
valuable asset — their information. As the tools and
processes from these formerly discrete
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domains become more integrated, we have taken a more proactive
and policy-driven approach to protecting and managing
information throughout its lifetime.
During fiscal 2009, we took the following actions to support our
business:
Our operating segments are significant strategic business units
that offer different products and services, distinguished by
customer needs. During fiscal 2009, we had five operating
segments: Consumer, Security and Compliance, Storage and Server
Management, Services, and Other.
Our Consumer segment provides suites and services that include
Internet security, PC tuneup, and backup for individual users
and home offices. Our
Nortontm
brand of consumer security software products provides protection
for
Windows®,
Macintosh®,
Windows-Mobile®,
and
Symbiantm
platforms.
New customer acquisition is driven by increased threats, the
need for identity protection, the growth of online transactions
and the rapid increase of consumer data, such as photos, music
libraries and video. Our award-winning Norton 2009 releases set
a new standard for speed and performance. We continue to acquire
customers through a diversified channel strategy that places our
products where customers want to buy, including most of the top
OEMs and through our number one position in retail. With the
acquisition of PC Tools, Symantec reaches more segments, such as
emerging markets, price sensitive consumers and new
e-commerce
channels.
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Norton retains and leverages its strong existing customer base
through auto-renewal subscriptions, migrating customers from
point products to multi-product suites such as Norton Internet
Security and Norton 360 and selling them additional products or
services such as NortonLive services or the new Norton Online
Backup. Through Norton 360, various partnerships and online
channels, we are the market leader for online backup. Symantec
hosts over 30 petabytes of consumers’ data and we have more
than 7 million customers.
Symantec continued improving its consumer customer experience,
satisfaction and loyalty during fiscal 2009. Our primary
consumer products are: Norton
360tm,
Norton Internet
Securitytm,
and Norton AntiVirus.
Our Security and Compliance segment helps our customers
standardize, automate and reduce the costs of day-to-day
security activities in order to secure and manage their
information.
Our primary solutions in this segment address the following
areas:
Enterprise security customer demand is driven by the quickly
evolving threat environment, compliance regulations, and the
need to keep confidential information from exposure outside the
organization. Our solutions are built on market-leading policy
management, data loss prevention, endpoint security, antispam,
and content filtering technologies, allowing IT professionals to
proactively mitigate information security risks and policy
violations. We also help customers define, control, and govern
their IT policies from a central location. This enables
customers to protect critical assets and reduce business risk.
Products include Symantec Endpoint Protection, Symantec Data
Loss Prevention, Control Compliance Suite and Symantec
Brightmail Gateway.
Our Endpoint Management business consisting of our systems
management products is driven by the need for automated asset
management, patch management and remediation. Our solutions
offer better visibility into IT assets, simplified day-to-day
manageability and improved end-user productivity, helping
customers realize cost savings and value from their existing IT
investments. Another key demand driver is endpoint
virtualization, which frees up critical information from the
myriad of operating system functions and devices so it can be
secured and managed. Our products include the Altiris Client
Management Suite, Altiris Server Management Suite, Altiris Total
Management Suite, and Symantec Endpoint Virtualization Suite.
Growth in our archiving business is driven by increased
e-discovery
requirements and the growth of unstructured data such as email
and instant messaging (“IM”). Symantec Enterprise
Vaulttm
optimizes storage by reducing expensive long-term storage of
this data in an easy to access format.
Our Storage and Server Management segment focuses on providing
enterprise customers with storage management, high availability,
and backup and recovery solutions across heterogeneous storage
and server platforms. These solutions enable companies to
standardize on a single layer of infrastructure software that
works on every major distributed operating system and supports
every major storage device, database, and application.
Our primary storage and server management solutions address the
following areas:
Our Storage Management and High Availability business is driven
by our customers’ need to reduce overall storage costs
through improved utilization of existing systems and
virtualization. The business is also driven by customer
migration to x86 based servers, which provides a reliance on
management and availability tools to manage complexity and
provide business continuity. Our products help customers
simplify their data centers by
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standardizing storage management across their environment for
more efficient use of their existing storage investment. They
also enable enterprises to manage large storage environments and
ensure the availability of critical applications. Products
include Veritas Storage
Foundationtm,
Veritas CommandCentral Storage, and
Veritastm
Cluster Server.
Growth in the backup and recovery business is driven by
migration from tape to disk-based backup, support for
virtualization, de-duplication, and continuous data protection.
The transition of NetBackup to a platform-based architecture
enables our customers to take advantage of these drivers.
Products include Veritas
NetBackuptm,
Veritas NetBackup
PureDisktm,
Symantec Backup
Exectm,
and Symantec Backup Exec System Recovery.
Symantec Global Services help customers address information
security, availability, storage, and compliance challenges at
the endpoint and in complex, multi-vendor data center
environments. Our Services segment delivers Consulting,
Education and Business Critical Services that help our customers
maximize the value of their investment in our products and
solutions. Managed Services and SaaS offerings provide customers
the additional choice of on-demand services to meet their IT
requirements.
Symantec Consulting provides advisory, product enablement and
residency services to enable customers to assess, design,
transform and operate their infrastructure, leveraging Symantec
products and solutions. Education Services provides a full range
of programs, including technical training and security awareness
training, to help customers optimize their Symantec solutions.
Business Critical Services, our highest level of support,
provides personalized, proactive support from technical experts
for enterprises that require secure, uninterrupted access to
their data and applications.
Symantec Managed Services and SaaS offerings enable customers to
place resource-intensive IT operations under the management of
experienced Symantec specialists in order to optimize existing
resources and focus on strategic IT projects. This helps
customers by reducing IT complexity, managing IT risk, and
lowering the cost of operations. Recently acquired SaaS
offerings from MessageLabs, combined with our Symantec
Protection Network backup and recovery offerings provide our
customers the flexibility to manage their business using online
services or hybrid onsite and in-the-cloud solutions. These
services include Symantec Managed Security Services, Symantec
Managed Backup and MessageLabs Email Security Solutions.
For information regarding our revenue by segment, revenue by
geographical area, and long-lived assets by geographical area,
see Note 12 of the Notes to Consolidated Financial
Statements in this annual report. For information regarding the
amount and percentage of our revenue contributed in each of our
segments and our financial information, including information
about geographic areas in which we operate, see Item 7,
Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Note 12 of the
Notes to Consolidated Financial Statements in this annual
report. For information regarding risks associated with our
international operations, see Item 1A, Risk Factors.
We sell our consumer products and services to individuals and
home offices globally through a multi-tiered network of
distribution partners and through
e-commerce
channels. Our products are available to customers through
distributors, retailers, direct marketers, Internet-based
resellers, OEMs, system builders, and ISPs.
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Sales in the Consumer business through our electronic
distribution channel, which includes sales derived from OEMs,
subscriptions, upgrades, online sales, and renewals, grew by
$143 million in fiscal 2009 over fiscal 2008. During fiscal
2009, approximately 79 percent of revenue in the Consumer
segment came from our electronic channels.
We sell and market our products and related services to
enterprise customers through our direct sales force of more than
3,500 and through a variety of indirect sales channels, which
include value-added resellers, large account resellers,
distributors, and system integrators. We also sell our products
through authorized distributors in more than 40 countries and
OEM partners who incorporate our technologies into their
products, bundle our products with their offerings, or serve as
authorized resellers of our products. Our sales efforts are
primarily targeted to senior executives and IT department
personnel responsible for managing a company’s IT
initiatives.
During fiscal 2009, we added a SaaS delivery model offering a
pay-as-you-go model that meets the needs of enterprise and small
and medium business with evolving storage and security
requirements.
Our marketing expenditure relates primarily to advertising and
promotion, which includes demand generation and brand
recognition of our consumer and enterprise products. Our
advertising and promotion efforts include, but are not limited
to, electronic and print advertising, trade shows, collateral
production, and all forms of direct marketing. We also invest in
cooperative marketing campaigns with distributors, resellers,
retailers, OEMs, and industry partners.
We invest in various retention marketing and customer loyalty
programs to help drive renewals and encourage customer advocacy
and referrals. We also provide focused vertical marketing
programs in targeted industries and countries.
We typically offer two types of rebate programs within most
countries: volume incentive rebates to channel partners and
promotional rebates to distributors and end-users. Distributors
and resellers earn volume incentive rebates primarily based upon
product sales to end-users. We also offer rebates to individual
users who purchase products through various resale channels. We
regularly offer upgrade rebates to consumers purchasing a new
version of a product. Both volume incentive rebates and end-user
rebates are accrued as an offset to revenue.
Symantec has centralized support facilities throughout the world
that provide rapid, around-the-clock response, and are staffed
by technical product experts knowledgeable in the operating
environments in which our products are deployed. Our technical
support experts assist customers with product implementation and
usage, issue resolution and countermeasures, and threat
detection.
Symantec provides customers various levels of enterprise support
offerings. Our enterprise security support program offers annual
maintenance support contracts, including content, upgrades, and
technical support. Our standard technical support includes:
unlimited hotline service delivered by telephone, fax, email,
and over the Internet; immediate patches for severe problems;
periodic software updates; and access to our technical knowledge
base and frequently asked questions.
Our Consumer product support program provides self-help online
services, phone, chat, email support and fee-based premium
support and diagnostic services to consumers worldwide.
Customers that subscribe to LiveUpdate receive automatic
downloads of the latest virus definitions, application bug
fixes, and patches for most of our consumer products.
In fiscal 2009, 2008 and 2007, one reseller, Digital River
accounted for 10%, 11% and 12%, respectively, of our total net
revenues. Digital River represented the only customer that
accounted for 10 percent or more of
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revenues in fiscal 2009. In fiscal 2008 and 2007, one
distributor, Ingram Micro accounted for 10% and 11%,
respectively, of our total net revenues. Our distributor
arrangements with Ingram Micro consist of several non-exclusive,
independently negotiated agreements with its subsidiaries, each
of which cover different countries or regions. Each of these
agreements is separately negotiated and is independent of any
other contract (such as a master distribution agreement), and
these agreements are not based on the same form of contract.
None of these contracts were individually responsible for over
10 percent of our total net revenues in fiscal 2008 and
2007.
Research and development expenses, exclusive of in-process
research and development associated with acquisitions, were
$880 million, $894 million and $867 million in
fiscal 2009, 2008 and 2007, respectively, representing
approximately 14%, 15% and 17% of revenue in the respective
periods. We believe that technical leadership is essential to
our success and we expect to continue to commit substantial
resources to research and development.
Symantec embraces a global R&D strategy to drive organic
innovation across the company. Engineers throughout the company
pursue advanced projects and work with our engineering centers,
research labs, global services teams, and new business incubator
to translate R&D into next-generation security, storage and
systems management technologies. Symantec focuses on short,
medium, and long-term applied research, develops new products in
emerging areas, participates in government-funded research
projects, and partners with universities to conduct research to
support Symantec’s vision. Symantec holds more than 600
global patents.
Our Security Response experts, located at research centers
throughout the world, are focused on collecting and analyzing
the latest malware threats, ranging from network security
threats and vulnerabilities to viruses and worms. All this data
is collected through the Symantec Global Intelligence Network,
which provides insight into emerging trends in attacks,
malicious code activity, phishing, spam, and other threats. This
hands-on expertise is further leveraged in developing new
technologies and approaches to protecting customers’
information and systems.
Our strategic technology acquisitions are designed to enhance
the features and functionality of our existing products, and
extend our product leadership, as well as to expand into
emerging businesses such as SaaS and endpoint virtualization. We
consider time to market, synergies with existing products, and
potential market share gains when evaluating acquisitions of
technologies, product lines, or companies. We may acquire
and/or
dispose of other technologies, products and companies in the
future.
During fiscal 2009, we completed the following acquisitions:
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For further discussion of our acquisitions, see Note 5 of
the Notes to Consolidated Financial Statements in this annual
report.
Our markets are consolidating, highly competitive, and subject
to rapid changes in technology. We are focused on integrating
next generation technology capabilities into our solution set in
order to differentiate ourselves from the competition. We
believe that the principal competitive factors necessary to be
successful in our industry also include, time to market, price,
reputation, financial stability, breadth of product offerings,
customer support, brand recognition, and effective sales and
marketing efforts.
In addition to the competition we face from direct competitors,
we face indirect or potential competition from retail,
application providers, operating system providers, network
equipment manufacturers, and other OEMs, who may provide various
solutions and functions in their current and future products. We
also compete for access to retail distribution channels and for
the attention of customers at the retail level and in corporate
accounts. In addition, we compete with other software companies,
operating system providers, network equipment manufacturers and
other OEMs to acquire technologies, products, or companies and
to publish software developed by third parties. We also compete
with other software companies in our effort to place our
products on the computer equipment sold to consumers by OEMs.
The competitive environments in which each segment operates are
described below.
Some of the channels in which our consumer products are offered
are highly competitive. Our competitors are intensely focused on
customer acquisition, which has led such competitors to offer
their technology for free, engage in aggressive marketing, or
enter into competitive partnerships. Our primary competitors in
the Consumer segment are Kaspersky Lab, McAfee, Inc.
(“McAfee”), Microsoft Corporation
(“Microsoft”), and Trend Micro Inc. (“Trend
Micro”). There are also several smaller regional security
companies that we compete against primarily in the EMEA and APJ
regions. For our consumer backup offerings, our primary
competitors are Mozy, Inc. (“Mozy”), acquired by EMC
Corporation, and Carbonite, Inc.
In the security and management markets, we compete against many
companies that offer competing products to our technology
solutions. Our primary competitors in the security and
management market are LANDesk Software, Inc., McAfee, Microsoft,
and Trend Micro. There are also several smaller regional
security companies that we compete against primarily in the EMEA
and APJ regions.
The markets for storage and backup are intensely competitive.
Our primary competitors are CA, Inc., CommVault Systems, Inc.,
EMC Corporation (“EMC”), Hewlett-Packard Company
(“HP”), IBM Corp. (“IBM”), Microsoft, Sun
Microsystems, Inc., and VMware, Inc.
We believe that the principal competitive factors for our
services segment include technical capability, customer
responsiveness, and our ability to hire and retain talented and
experienced services personnel. Our primary competitors in the
services segment are EMC, HP, IBM, and regional specialized
consulting firms. In the managed security services business, our
primary competitors are IBM, SecureWorks, Inc., and VeriSign,
Inc.
In the SaaS business, which includes the MessageLabs offerings,
our primary competitors are Postini, acquired by Google, Inc.,
and Mozy.
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We regard some of the features of our internal operations,
software, and documentation as proprietary and rely on
copyright, patent, trademark and trade secret laws,
confidentiality procedures, contractual arrangements, and other
measures to protect our proprietary information. Our
intellectual property is an important and valuable asset that
enables us to gain recognition for our products, services, and
technology and enhance our competitive position.
As part of our confidentiality procedures, we generally enter
into non-disclosure agreements with our employees, distributors,
and corporate partners, and we enter into license agreements
with respect to our software, documentation, and other
proprietary information. These license agreements are generally
non-transferable and have a perpetual term. We also educate our
employees on trade secret protection and employ measures to
protect our facilities, equipment, and networks.
Symantec and the Symantec logo are trademarks or registered
trademarks in the U.S. and other countries. In addition to
Symantec and the Symantec logo, we have used, registered,
and/or
applied to register other specific trademarks and service marks
to help distinguish our products, technologies, and services
from those of our competitors in the U.S. and foreign
countries and jurisdictions. We enforce our trademark, service
mark, and trade name rights in the U.S. and abroad. The
duration of our trademark registrations varies from country to
country, and in the U.S. we generally are able to maintain
our trademark rights and renew any trademark registrations for
as long as the trademarks are in use.
We have a number of U.S. and foreign issued patents and
pending patent applications, including patents and rights to
patent applications acquired through strategic transactions,
which relate to various aspects of our products and technology.
The duration of our patents is determined by the laws of the
country of issuance and for the U.S. is typically
17 years from the date of issuance of the patent or
20 years from the date of filing of the patent application
resulting in the patent, which we believe is adequate relative
to the expected lives of our products.
Our products are protected under U.S. and international
copyright laws and laws related to the protection of
intellectual property and proprietary information. We take
measures to label such products with the appropriate proprietary
rights notices, and we actively enforce such rights in the
U.S. and abroad. However, these measures may not provide
sufficient protection, and our intellectual property rights may
be challenged. In addition, we license some intellectual
property from third parties for use in our products, and
generally must rely on the third party to protect the licensed
intellectual property rights. While we believe that our ability
to maintain and protect our intellectual property rights is
important to our success, we also believe that our business as a
whole is not materially dependent on any particular patent,
trademark, license, or other intellectual property right.
As is typical for many large software companies, our business is
seasonal. Software license and maintenance orders are generally
higher in our third and fourth fiscal quarters and lower in our
first and second fiscal quarters. A significant decline in
license and maintenance orders is typical in the first quarter
of our fiscal year as compared to license and maintenance orders
in the fourth quarter of the prior fiscal year. In addition, we
generally receive a higher volume of software license and
maintenance orders in the last month of a quarter, with orders
concentrated in the later part of that month. We believe that
this seasonality primarily reflects customer spending patterns
and budget cycles, as well as the impact of compensation
incentive plans for our sales personnel. Revenue generally
reflects similar seasonal patterns but to a lesser extent than
orders because revenue is not recognized until an order is
shipped or services are performed and other revenue recognition
criteria are met, and because a significant portion of our
in-period revenue is provided by the ratable recognition of our
deferred revenue balance.
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As of April 3, 2009, we employed more than
17,400 people worldwide, approximately 48 percent of
whom reside in the U.S. Approximately 6,300 employees
work in sales and marketing; 5,600 in research and development;
4,000 in support and services; and 1,500 in management,
manufacturing, and administration.
Our Internet address is www.symantec.com. We make
available free of charge on our website our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange
Commission (“SEC”). Other than the information
expressly set forth in this annual report, the information
contained, or referred to, on our website is not part of this
annual report.
The public may also read and copy any materials we file with the
SEC at the SEC’s Public Reference Room at
100 F Street, NE, Room 1580, Washington, DC
20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains a website at www.sec.gov that
contains reports, proxy and information statements, and other
information regarding issuers, such as us, that file
electronically with the SEC.
A description of the risk factors associated with our business
is set forth below. The list is not exhaustive and you should
carefully consider these risks and uncertainties before
investing in our common stock.
The recent global economic crisis has caused a tightening in the
credit markets, increases in the rates of default and
bankruptcy, and extreme volatility in credit, equity and fixed
income markets. These macroeconomic developments could
negatively affect our business, operating results or financial
condition under a number of different scenarios. For example,
current or potential customers may delay or forgo decisions to
license new products or additional instances of existing
products, upgrade their existing hardware or operating
environments (which upgrades are often a catalyst for new
purchases of our software), or purchase services. Customers may
also have difficulties in obtaining the requisite third-party
financing to complete the purchase of our products and services.
The current economic environment could also subject us to
increased credit risk should customers be unable to pay us, or
delay paying us, for previously purchased products and services.
Accordingly, reserves for doubtful accounts and write-offs of
accounts receivable may increase. In addition, weakness in the
market for end users of our products could harm the cash flow of
our distributors and resellers who could then delay paying their
obligations to us or experience other financial difficulties.
This would further increase our credit risk exposure and,
potentially, cause delays in our recognition of revenue on sales
to these customers.
In addition, financial institution difficulties
and/or
failures may make it more difficult either to utilize our
existing debt capacity or otherwise obtain financing for our
operations, investing activities (including potential
acquisitions) or financing activities. Specific economic trends,
such as declines in the demand for PCs, servers, and other
computing devices, or softness in corporate information
technology spending, could have an even more direct, and
harmful, impact on our business. Finally, our cash and our
investment portfolio, which includes short-term debt securities,
is subject to general credit, liquidity, counterparty, market
and interest rate risks that may be exacerbated by the recent
global financial crisis. Our investment in our joint venture
with Huawei Technologies Co. Ltd. could also become impaired. If
the banking system or the fixed income, credit or equity markets
continue to deteriorate or remain volatile, our cash and our
investment portfolio may be impacted and the values and
liquidity of our investments could be harmed.
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We are subject to fluctuations in demand for our products and
services due to a variety of factors, including general economic
conditions, competition, product obsolescence, technological
change, shifts in buying patterns, financial difficulties and
budget constraints of our actual and potential customers, levels
of broadband usage, awareness of security threats to IT systems,
and other factors. While such factors may, in some periods,
increase product sales, fluctuations in demand can also
negatively impact our product sales. If demand for our products
declines because of general economic conditions or for other
reasons, our revenues and gross margin could be adversely
affected.
If we
are unable to develop new and enhanced products and services
that achieve widespread market acceptance, or if we are unable
to continually improve the performance, features, and
reliability of our existing products and services or adapt our
business model to keep pace with industry trends, our business
and operating results could be adversely affected.
Our future success depends on our ability to respond to the
rapidly changing needs of our customers by developing or
introducing new products, product upgrades, and services on a
timely basis. We have in the past incurred, and will continue to
incur, significant research and development expenses as we
strive to remain competitive. New product development and
introduction involves a significant commitment of time and
resources and is subject to a number of risks and challenges
including:
In addition, if we cannot adapt our business models to keep pace
with industry trends, our revenue could be negatively impacted.
In connection with our enterprise software offerings, we license
our applications on a variety of bases, such as per server, per
processor, or based on performance criteria such as per amount
of data processed or stored. If enterprises continue to migrate
towards solutions, such as virtualization, which allow
enterprises to run multiple applications and operating systems
on a single server and thereby reduce the number of servers they
are required to own and operate, we may experience lower license
revenues unless we are able to successfully change our
enterprise licensing model or sell additional software to take
into account the impact of these new solutions.
If we are not successful in managing these risks and challenges,
or if our new products, product upgrades, and services are not
technologically competitive or do not achieve market acceptance,
our business and operating results could be adversely affected.
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We operate in intensely competitive markets that experience
rapid technological developments, changes in industry standards,
changes in customer requirements, and frequent new product
introductions and improvements. If we are unable to anticipate
or react to these competitive challenges or if existing or new
competitors gain market share in any of our markets, our
competitive position could weaken and we could experience a drop
in revenue that could adversely affect our business and
operating results. To compete successfully, we must maintain a
successful research and development effort to develop new
products and services and enhance existing products and
services, effectively adapt to changes in the technology or
product rights held by our competitors, appropriately respond to
competitive strategies, and effectively adapt to technological
changes and changes in the ways that our information is
accessed, used, and stored within our enterprise and consumer
markets. If we are unsuccessful in responding to our competitors
or to changing technological and customer demands, we could
experience a negative effect on our competitive position and our
financial results.
Our traditional competitors include independent software vendors
that offer software products that directly compete with our
product offerings. In addition to competing with these vendors
directly for sales to end-users of our products, we compete with
them for the opportunity to have our products bundled with the
product offerings of our strategic partners such as computer
hardware OEMs and ISPs. Our competitors could gain market share
from us if any of these strategic partners replace our products
with the products of our competitors or if they more actively
promote our competitors’ products than our products. In
addition, software vendors who have bundled our products with
theirs may choose to bundle their software with their own or
other vendors’ software or may limit our access to standard
product interfaces and inhibit our ability to develop products
for their platform.
We face growing competition from network equipment and computer
hardware manufacturers and large operating system providers.
These firms are increasingly developing and incorporating into
their products data protection and storage and server management
software that competes at some levels with our product
offerings. Our competitive position could be adversely affected
to the extent that our customers perceive the functionality
incorporated into these products as replacing the need for our
products.
Another growing industry trend is the SaaS business model,
whereby software vendors develop and host their applications for
use by customers over the Internet. This allows enterprises to
obtain the benefits of commercially licensed, internally
operated software without the associated complexity or high
initial
set-up and
operational costs. Advances in the SaaS business model could
enable the growth of our competitors and could affect the
success of our traditional software licensing models. We have
released our own SaaS offerings and we recently acquired Message
Labs, a provider of SaaS offerings, and we continue to
incorporate these offerings into our licensing model. However,
it is uncertain whether our SaaS strategy will prove successful
or whether we will be able to successfully incorporate our SaaS
offerings into our current licensing models. Our inability to
successfully develop and market SaaS product offerings could
cause us to lose business to competitors.
Many of our competitors have greater financial, technical,
sales, marketing, or other resources than we do and consequently
may have the ability to influence customers to purchase their
products instead of ours. We also face competition from many
smaller companies that specialize in particular segments of the
markets in which we compete.
We sell our products to customers around the world through
multi-tiered sales and distribution networks. Sales through
these different channels involve distinct risks, including the
following:
Direct Sales. A significant portion of our
revenues from enterprise products is derived from sales by our
direct sales force to end-users. Special risks associated with
this sales channel include:
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Indirect Sales Channels. A significant portion
of our revenues is derived from sales through indirect channels,
including distributors that sell our products to end-users and
other resellers. This channel involves a number of risks,
including:
OEM Sales Channels. A significant portion of
our revenues is derived from sales through our OEM partners that
incorporate our products into, or bundle our products with,
their products. Our reliance on this sales channel involves many
risks, including:
As noted above, the amount of our sales through our OEM channels
is significantly affected by our partners’ sales of new
products into which our products are bundled. The adverse
developments in global economic conditions are, among other
things, adversely affecting personal computer sales, and if this
trend continues our Consumer segment could continue to be
adversely affected.
If we fail to manage our sales and distribution channels
successfully, these channels may conflict with one another or
otherwise fail to perform as we anticipate, which could reduce
our sales and increase our expenses as well as weaken our
competitive position. Some of our distribution partners have
experienced financial difficulties in the past, and if our
partners suffer financial difficulties in the future because of
general economic conditions or for other reasons, these partners
may delay paying their obligations to us and we may have reduced
sales or increased bad debt expense that could adversely affect
our operating results. In addition, reliance on multiple
channels subjects us to events that could cause unpredictability
in demand, which could increase the risk that we may be unable
to plan effectively for the future, and could result in adverse
operating results in future periods.
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We have in the past acquired, and we expect to acquire in the
future, other businesses, business units, and technologies.
Acquisitions can involve a number of special risks and
challenges, including:
Integrating acquired businesses has been and will continue to be
a complex, time consuming, and expensive process, and can impact
the effectiveness of our internal control over financial
reporting.
If integration of our acquired businesses is not successful, we
may not realize the potential benefits of an acquisition or
suffer other adverse effects that we currently do not foresee.
To integrate acquired businesses, we must implement our
technology systems in the acquired operations and integrate and
manage the personnel of the acquired operations. We also must
effectively integrate the different cultures of acquired
business organizations into our own in a way that aligns various
interests, and may need to enter new markets in which we have no
or limited experience and where competitors in such markets have
stronger market positions.
Any of the foregoing, and other factors, could harm our ability
to achieve anticipated levels of profitability from acquired
businesses or to realize other anticipated benefits of
acquisitions. In addition, because acquisitions of high
technology companies are inherently risky, no assurance can be
given that our previous or future acquisitions will be
successful and will not adversely affect our business, operating
results, or financial condition.
In June 2006, we sold $2.1 billion in aggregate principal
amount of convertible senior notes. As a result of the sale of
the notes, we have a substantially greater amount of long-term
debt than we have maintained in the past. In addition, we have
entered into a credit facility with a borrowing capacity of
$1 billion. As of April 3, 2009, we had no borrowings
under our credit facility. From time to time in the future, we
may also incur indebtedness in addition to the amount available
under our credit facility. Our maintenance of substantial levels
of debt could adversely affect our flexibility to take advantage
of certain corporate opportunities and could adversely affect
our financial condition and results of operations. Of our
outstanding convertible notes, $1.1 billion matures and is
repayable in June 2011 and the balance is due in June 2013. We
may be required to use all or a substantial portion of our cash
balance to repay these notes on maturity unless we can obtain
new financing.
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We derive a substantial portion of our revenues from customers
located outside of the U.S. and we have significant
operations outside of the U.S., including engineering, sales,
customer support, and production. We plan to expand our
international operations, but such expansion is contingent upon
the financial performance of our existing international
operations as well as our identification of growth
opportunities. Our international operations are subject to risks
in addition to those faced by our domestic operations, including:
A significant portion of our transactions outside of the
U.S. are denominated in foreign currencies. Accordingly,
our revenues and expenses will continue to be subject to
fluctuations in foreign currency rates. We expect to be affected
by fluctuations in foreign currency rates in the future,
especially if international sales continue to grow as a
percentage of our total sales or our operations outside the
United States continue to increase.
The level of corporate tax from sales to our
non-U.S. customers
is less than the level of tax from sales to our
U.S. customers. This benefit is contingent upon existing
tax regulations in the U.S. and in the countries in which
our international operations are located. Future changes in
domestic or international tax regulations could adversely affect
our ability to continue to realize these tax benefits.
Because we offer very complex products, undetected errors,
failures, or bugs may occur, especially when products are first
introduced or when new versions are released. Our products are
often installed and used in large-scale computing environments
with different operating systems, system management software,
and equipment and
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networking configurations, which may cause errors or failures in
our products or may expose undetected errors, failures, or bugs
in our products. Our customers’ computing environments are
often characterized by a wide variety of standard and
non-standard configurations that make pre-release testing for
programming or compatibility errors very difficult and
time-consuming. In addition, despite testing by us and others,
errors, failures, or bugs may not be found in new products or
releases until after commencement of commercial shipments. In
the past, we have discovered software errors, failures, and bugs
in certain of our product offerings after their introduction
and, in some cases, may have experienced delayed or lost
revenues as a result of these errors.
Errors, failures, or bugs in products released by us could
result in negative publicity, damage to our brand, product
returns, loss of or delay in market acceptance of our products,
loss of competitive position, or claims by customers or others.
Many of our end-user customers use our products in applications
that are critical to their businesses and may have a greater
sensitivity to defects in our products than to defects in other,
less critical, software products. In addition, if an actual or
perceived breach of information integrity or availability occurs
in one of our end-user customer’s systems, regardless of
whether the breach is attributable to our products, the market
perception of the effectiveness of our products could be harmed.
Alleviating any of these problems could require significant
expenditures of our capital and other resources and could cause
interruptions, delays, or cessation of our product licensing,
which could cause us to lose existing or potential customers and
could adversely affect our operating results.
If we
are unable to attract and retain qualified employees, lose key
personnel, fail to integrate replacement personnel successfully,
or fail to manage our employee base effectively, we may be
unable to develop new and enhanced products and services,
effectively manage or expand our business, or increase our
revenues.
Our future success depends upon our ability to recruit and
retain our key management, technical, sales, marketing, finance,
and other critical personnel. Our officers and other key
personnel are
employees-at-will,
and we cannot assure you that we will be able to retain them.
Competition for people with the specific skills that we require
is significant. In order to attract and retain personnel in a
competitive marketplace, we believe that we must provide a
competitive compensation package, including cash and
equity-based compensation. The volatility in our stock price may
from time to time adversely affect our ability to recruit or
retain employees. In addition, we may be unable to obtain
required stockholder approvals of future increases in the number
of shares available for issuance under our equity compensation
plans, and accounting rules require us to treat the issuance of
employee stock options and other forms of equity-based
compensation as compensation expense. As a result, we may decide
to issue fewer equity-based incentives and may be impaired in
our efforts to attract and retain necessary personnel. If we are
unable to hire and retain qualified employees, or conversely, if
we fail to manage employee performance or reduce staffing levels
when required by market conditions, our business and operating
results could be adversely affected.
From time to time, key personnel leave our company. While we
strive to reduce the negative impact of such changes, the loss
of any key employee could result in significant disruptions to
our operations, including adversely affecting the timeliness of
product releases, the successful implementation and completion
of company initiatives, the effectiveness of our disclosure
controls and procedures and our internal control over financial
reporting, and the results of our operations. In addition,
hiring, training, and successfully integrating replacement sales
and other personnel could be time consuming, may cause
additional disruptions to our operations, and may be
unsuccessful, which could negatively impact future revenues.
We have been named as a party to class action lawsuits, and we
may be named in additional litigation. The expense of defending
such litigation may be costly and divert management’s
attention from the day-to-day operations of our business, which
could adversely affect our business, results of operations, and
cash flows. In addition, an unfavorable outcome in such
litigation could negatively impact our business, results of
operations, and cash flows.
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From time to time, we receive claims that we have infringed the
intellectual property rights of others, including claims
regarding patents, copyrights, and trademarks. In addition,
former employers of our former, current, or future employees may
assert claims that such employees have improperly disclosed to
us the confidential or proprietary information of these former
employers. Any such claim, with or without merit, could result
in costly litigation and distract management from day-to-day
operations. If we are not successful in defending such claims,
we could be required to stop selling, delay shipments of, or
redesign our products, pay monetary amounts as damages, enter
into royalty or licensing arrangements, or satisfy
indemnification obligations that we have with some of our
customers. We cannot assure you that any royalty or licensing
arrangements that we may seek in such circumstances will be
available to us on commercially reasonable terms or at all.
In addition, we license and use software from third parties in
our business. These third party software licenses may not
continue to be available to us on acceptable terms or at all,
and may expose us to additional liability. This liability, or
our inability to use any of this third party software, could
result in shipment delays or other disruptions in our business
that could materially and adversely affect our operating results.
Most of our software and underlying technology is proprietary.
We seek to protect our proprietary rights through a combination
of confidentiality agreements and procedures and through
copyright, patent, trademark, and trade secret laws. However,
all of these measures afford only limited protection and may be
challenged, invalidated, or circumvented by third parties. Third
parties may copy all or portions of our products or otherwise
obtain, use, distribute, and sell our proprietary information
without authorization. Third parties may also develop similar or
superior technology independently by designing around our
patents. Our shrink-wrap license agreements are not signed by
licensees and therefore may be unenforceable under the laws of
some jurisdictions. Furthermore, the laws of some foreign
countries do not offer the same level of protection of our
proprietary rights as the laws of the U.S., and we may be
subject to unauthorized use of our products in those countries.
The unauthorized copying or use of our products or proprietary
information could result in reduced sales of our products. Any
legal action to protect proprietary information that we may
bring or be engaged in with a strategic partner or vendor could
adversely affect our ability to access software, operating
system, and hardware platforms of such partner or vendor, or
cause such partner or vendor to choose not to offer our products
to their customers. In addition, any legal action to protect
proprietary information that we may bring or be engaged in,
alone or through our alliances with the Business Software
Alliance (“BSA”), or the Software &
Information Industry Association (“SIIA”), could be
costly, may distract management from day-to-day operations, and
may lead to additional claims against us, which could adversely
affect our operating results.
Certain of our products are distributed with software licensed
by its authors or other third parties under so-called “open
source” licenses, which may include, by way of example, the
GNU General Public License (“GPL”), GNU Lesser General
Public License (“LGPL”), the Mozilla Public License,
the BSD License, and the Apache License. Some of these licenses
contain requirements that we make available source code for
modifications or derivative works we create based upon the open
source software, and that we license such modifications or
derivative works under the terms of a particular open source
license or other license granting third parties certain rights
of further use. If we combine our proprietary software with open
source software in a certain manner, we could, under certain of
the open source licenses, be required to release the source code
of our proprietary software. In addition to risks related to
license requirements, usage of open source software can lead to
greater risks than use of third party commercial software, as
open source licensors generally do not provide warranties or
controls on origin of the software. We have established
processes to help alleviate these risks, including a review
process for screening requests from our development
organizations for the use of open source, but we cannot be sure
that all
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open source is submitted for approval prior to use in our
products. In addition, many of the risks associated with usage
of open source cannot be eliminated, and could, if not properly
addressed, negatively affect our business.
Although we believe we have sufficient controls in place to
prevent intentional disruptions, we expect to be an ongoing
target of attacks specifically designed to impede the
performance of our products. Similarly, experienced computer
programmers may attempt to penetrate our network security or the
security of our website and misappropriate proprietary
information or cause interruptions of our services. Because the
techniques used by such computer programmers to access or
sabotage networks change frequently and may not be recognized
until launched against a target, we may be unable to anticipate
these techniques. Our activities could be adversely affected and
our reputation, brand and future sales harmed if these
intentionally disruptive efforts are successful.
We offer technical support services with many of our products.
We may be unable to respond quickly enough to accommodate
short-term increases in customer demand for support services. We
also may be unable to modify the format of our support services
to compete with changes in support services provided by
competitors or successfully integrate support for our customers.
Further customer demand for these services, without
corresponding revenues, could increase costs and adversely
affect our operating results.
We have outsourced a substantial portion of our worldwide
consumer support functions to third party service providers. If
these companies experience financial difficulties, do not
maintain sufficiently skilled workers and resources to satisfy
our contracts, or otherwise fail to perform at a sufficient
level under these contracts, the level of support services to
our customers may be significantly disrupted, which could
materially harm our relationships with these customers.
Our financial results have been in the past, and may continue to
be in the future, materially affected by non-cash and other
accounting charges, including:
For example, during fiscal 2009, we recorded a non-cash goodwill
impairment charge of $7.4 billion, resulting in a
significant net loss for the year. Goodwill is evaluated
annually for impairment in the fourth quarter of each fiscal
year or more frequently if events and circumstances warrant as
we determined they did in the third quarter of fiscal 2009, and
our evaluation depends to a large degree on estimates and
assumptions made by our management. Our assessment of any
impairment of goodwill is based on a comparison of the fair
value of each of our reporting units to the carrying value of
that reporting unit. Our determination of fair value relies on
management’s assumptions of our future revenues, operating
costs, and other relevant factors. If management’s
estimates of future operating results change, or if there are
changes to other key assumptions such as the discount rate
applied to future operating results, the estimate of the fair
value of our reporting units could change significantly, which
could result in a goodwill impairment charge. In addition, we
evaluate our other long-lived assets, including intangible
assets whenever events or circumstances occur which indicate
that the value of these assets might be impaired. If we
determine that impairment has occurred, we could incur an
impairment charge against the value of these assets.
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The foregoing types of accounting charges may also be incurred
in connection with or as a result of other business
acquisitions. The price of our common stock could decline to the
extent that our financial results are materially affected by the
foregoing accounting charges.
Our effective tax rate could be adversely affected by several
factors, many of which are outside of our control, including:
The price of our common stock could decline if our financial
results are materially affected by an adverse change in our
effective tax rate.
We report our results of operations based on our determinations
of the amount of taxes owed in the various tax jurisdictions in
which we operate. From time to time, we receive notices that a
tax authority in a particular jurisdiction in which we are
subject to taxes has determined that we owe a greater amount of
tax than we have reported to such authority. We are regularly
engaged in discussions and sometimes disputes with these tax
authorities. We are engaged in disputes of this nature at this
time. If the ultimate determination of our taxes owed in any of
these jurisdictions is for an amount in excess of the tax
provision we have recorded or reserved for, our operating
results, cash flows, and financial condition could be adversely
affected.
Our quarterly financial results have fluctuated in the past and
are likely to vary significantly in the future due to a number
of factors, many of which are outside of our control and which
could adversely affect our operations and operating results. If
our quarterly financial results or our predictions of future
financial results fail to meet the expectations of securities
analysts and investors, our stock price could be negatively
affected. Any volatility in our quarterly financial results may
make it more difficult for us to raise capital in the future or
pursue acquisitions that involve issuances of our stock. Our
operating results for prior periods may not be effective
predictors of our future performance.
Factors associated with our industry, the operation of our
business, and the markets for our products may cause our
quarterly financial results to fluctuate, including:
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Any of the foregoing factors could cause the trading price of
our common stock to fluctuate significantly.
The market price of our common stock has experienced significant
fluctuations in the past and may continue to fluctuate in the
future, and as a result you could lose the value of your
investment. The market price of our common stock may be affected
by a number of factors, including:
The stock market in general, and the market prices of stocks of
technology companies in particular, have experienced extreme
price volatility that has adversely affected, and may continue
to adversely affect, the market price of our common stock for
reasons unrelated to our business or operating results.
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There are currently no unresolved issues with respect to any
Commission staff’s written comments that were received at
least 180 days before the end of our fiscal year to which this
report relates and that relate to our periodic or current
reports under the Exchange Act.
Our properties consist primarily of owned and leased office
facilities for sales, research and development, administrative,
customer service, and technical support personnel. Our corporate
headquarters is located in Cupertino, California in a
438,000 square foot facility that we own of which
409,000 square feet is classified as Assets Held for Sale.
We occupy an additional 782,000 square feet in the
San Francisco Bay Area, of which 592,000 square feet
is owned and 190,000 square feet is leased. Our leased
facilities are occupied under leases that expire at various
times through 2029. The following table presents the approximate
square footage of our facilities as of April 3, 2009:
We believe that our existing facilities are adequate for our
current needs and that the productive capacity of our facilities
is substantially utilized.
Information with respect to this Item may be found under the
heading “Litigation Contingencies” in Note 10 of
the Notes to Consolidated Financial Statements in this annual
report which information is incorporated into this Item 3
by reference.
No matters were submitted to a vote of security holders during
the fourth quarter of fiscal 2009.
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Our common stock is traded on the Nasdaq Global Select Market
under the symbol “SYMC.” The high and low sales prices
set forth below are as reported on the Nasdaq Global Select
Market.
As of April 3, 2009, there were 3,140 stockholders of
record of Symantec common stock. Symantec has never declared or
paid any cash dividends on its capital stock. We currently
intend to retain future earnings for use in our business, and,
therefore, we do not anticipate paying any cash dividends on our
capital stock in the foreseeable future.
Stock repurchases during the three months ended April 3,
2009 were as follows:
We have operated stock repurchase programs in the past. Our most
recent program was authorized by our Board of Directors on
June 14, 2007 to repurchase up to $2 billion of our
common stock. This program does not have an expiration date and
as of April 3, 2009, $300 million remained authorized
for future repurchases. For information with regard to our stock
repurchase programs, see Note 11 of the Notes to
Consolidated Financial Statements in this annual report.
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These performance graphs shall not be deemed “filed”
for purposes of Section 18 of the Exchange Act or otherwise
subject to the liabilities under that Section, and shall not be
deemed to be incorporated by reference into any filing of
Symantec under the Securities Act or the Exchange Act.
The graph below compares the cumulative total stockholder return
on Symantec common stock from March 31, 2004 to
March 31, 2009 with the cumulative total return on the
S&P 500 Composite Index and the S&P Information
Technology Index over the same period (assuming the investment
of $100 in Symantec common stock and in each of the other
indices on March 31, 2004, and reinvestment of all
dividends, although no dividends other than stock dividends have
been declared on Symantec common stock). The comparisons in the
graph below are based on historical data and are not intended to
forecast the possible future performance of Symantec common
stock.
*$100 invested on
3/31/04 in
stock or index. Fiscal year ending March 31.
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The graph below compares the cumulative total stockholder return
on Symantec common stock from June 23, 1989 (the date of
Symantec’s initial public offering) to March 31, 2009
with the cumulative total return on the S&P 500 Composite
Index and the S&P Information Technology Index over the
same period (assuming the investment of $100 in Symantec common
stock and in each of the other indices on June 30, 1989,
and reinvestment of all dividends, although no dividends other
than stock dividends have been declared on Symantec common
stock). Symantec has provided this additional data to provide
the perspective of a longer time period which is consistent with
Symantec’s history as a public company. The comparisons in
the graph below are based on historical data and are not
intended to forecast the possible future performance of Symantec
common stock.
*$100 invested on
6/23/89 in
stock or
5/31/89 in
index. Fiscal year ending March 31.
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The following selected consolidated financial data is derived
from the Consolidated Financial Statements included in this
annual report. This data is qualified in its entirety by and
should be read in conjunction with the more detailed
Consolidated Financial Statements and related notes included in
this annual report and with Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of
Operations. Historical results may not be indicative of
future results.
During the past five fiscal years, we have made the following
acquisitions:
Each of these acquisitions was accounted for as a business
purchase and, accordingly, the operating results of these
businesses have been included in the Consolidated Financial
Statements included in this annual report since their respective
dates of acquisition.
Five-Year
Summary
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OVERVIEW
Symantec is a global leader in providing security, storage and
systems management solutions to help businesses and consumers
secure and manage their information. We provide customers
worldwide with software and services that protect, manage and
control information risks related to security, data protection,
storage, compliance, and systems management. We help our
customers manage cost, complexity and compliance by protecting
their IT infrastructure as they seek to maximize value from
their IT investments.
We have a 52/53-week fiscal year ending on the Friday closest to
March 31. Unless otherwise stated, references to fiscal
years in this report relate to fiscal year and periods ended
April 3, 2009, March 28, 2008 and March 30, 2007.
Fiscal 2008 and 2007 each consisted of 52 weeks while
fiscal 2009 consisted of 53 weeks. Our 2010 fiscal year
will consist of 52 weeks and will end on April 2, 2010.
Our operating segments are significant strategic business units
that offer different products and services, distinguished by
customer needs. Since the March 2008 quarter, we have operated
in five operating segments: Consumer, Security and Compliance,
Storage and Server Management, Services, and Other. During the
June 2008 quarter, we changed our reporting segments to better
align our operating structure, resulting in the Altiris services
that were formerly included in the Security and Compliance
segment being moved to the Services segment. We revised the
segment information for the prior year to conform to the new
presentation.
For further descriptions of our operating segments, see
Note 12 of the Notes to Consolidated Financial Statements
in this annual report. Our reportable segments are the same as
our operating segments.
Revenue for fiscal 2009 was $6.1 billion, or 5% higher than
revenue for fiscal 2008. For fiscal 2009, we realized revenue
growth in the Americas and Asia Pacific Japan as compared to
fiscal 2008 and experienced revenue growth in all of our
segments. Revenue growth in our EMEA geography was relatively
flat from fiscal 2008 to fiscal 2009. Foreign currency
fluctuations had relatively little overall impact on our
international revenue growth for fiscal 2009 compared to fiscal
2008. In fiscal 2008, foreign currency fluctuations positively
impacted our revenue growth internationally compared to fiscal
2007. We are unable to predict the extent to which revenues in
future periods will be impacted by changes in foreign currency
exchange rates. If international sales become a greater portion
of our total sales in the future, changes in foreign exchange
rates may have a greater impact on our revenues and operating
results.
In fiscal 2009 the global economic slowdown increased
competitive pricing pressures and led to longer lead times in
the sales of some of our products and may have otherwise
adversely affected purchase decisions in our
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markets. If the challenging economic conditions affecting global
markets continue or deteriorate further, we may experience
slower or negative revenue growth and our business and operating
results might suffer. For example, our revenue declined slightly
in the fourth quarter of fiscal 2009 relative to the fourth
quarter of fiscal 2008, although this was due in part to year
over year changes in foreign exchange rates. In light of these
economic conditions, we will continue to align our cost
structure with our revenue expectations.
Employee-related costs have been the primary driver of our
operating expenses, and we expect this trend to continue.
Employee-related costs include items such as wages, commissions,
bonuses, vacation, benefits, and stock-based compensation. We
had 17,426, 17,648, and 17,131 employees as of the end of
fiscal 2009, 2008 and 2007, respectively. The decrease during
fiscal 2009 was primarily attributable to the impact of our cost
and expense discipline, partially offset by employees added
through acquisitions.
During fiscal 2009, based on a combination of factors, including
the current economic environment and a sustained decline in our
market capitalization, we concluded that there were sufficient
indicators to require us to perform an interim goodwill
impairment analysis. As a result of this interim analysis, we
recorded a $7.4 billion non-cash goodwill impairment during
fiscal 2009. Primarily as a result of this charge, our net loss
was $6.7 billion for fiscal 2009 as compared to our net
income of $464 million and $404 million for fiscal
2008 and 2007, respectively.
On November 14, 2008, we acquired MessageLabs Group Limited
(“MessageLabs”), a nonpublic United Kingdom-based
provider of managed services to protect, control, encrypt, and
archive electronic communications for $630 million, net of
cash acquired. We believe this acquisition complements our SaaS
business.
On October 6, 2008, we acquired PC Tools Pty Ltd. (“PC
Tools”), a nonpublic Australia-based provider of security
and systems software, for approximately $262 million in
cash, net of cash acquired. We believe this acquisition
complements our consumer security software business.
We completed four other acquisitions during fiscal 2009 for a
combined cash consideration of $215 million. See
Note 5 of the Notes to Consolidated Financial Statements in
this annual report for further details.
In the face of a challenging economic environment, cash flows
remained strong in fiscal 2009 as we achieved $1.7 billion
in operating cash flow. We ended fiscal 2009 with nearly
$2.0 billion in cash, cash equivalents, and short-term
investments. In addition, during fiscal 2009 we repurchased
42 million shares of our common stock at an average price
of $16.53, for total consideration of $700 million.
The preparation of the Consolidated Financial Statements and
related notes included in this annual report in accordance with
generally accepted accounting principles in the United States,
requires us to make estimates, which include judgments and
assumptions, that affect the reported amounts of assets,
liabilities, revenue, and expenses, and related disclosure of
contingent assets and liabilities. We have based our estimates
on historical experience and on various assumptions that we
believe to be reasonable under the circumstances. We evaluate
our estimates on a regular basis and make changes accordingly.
Historically, our critical accounting estimates have not
differed materially from actual results; however, actual results
may differ from these estimates under different conditions. If
actual results differ from these estimates and other
considerations used in estimating amounts reflected in the
Consolidated Financial Statements included in this annual
report, the resulting changes could have a material adverse
effect on our Consolidated Statements of Operations, and in
certain situations, could have a material adverse effect on
liquidity and our financial condition.
A critical accounting estimate is based on judgments and
assumptions about matters that are uncertain at the time the
estimate is made. Different estimates that reasonably could have
been used or changes in accounting estimates could materially
impact the operating results or financial condition. We believe
that the estimates described below represent our critical
accounting estimates, as they have the greatest potential impact
on our consolidated financial statements. See also Note 1
of the Notes to the Consolidated Financial Statements included
in this annual report.
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We recognize revenue in accordance with generally accepted
accounting principles that have been prescribed for the software
industry. We recognize revenue primarily pursuant to the
requirements of Statement of Position
97-2,
Software Revenue Recognition, and any applicable
amendments or modifications. Revenue recognition requirements in
the software industry are very complex and require us to make
many estimates.
In arrangements that include multiple elements, including
perpetual software licenses and maintenance
and/or
services, and packaged products with content updates, we
allocate and defer revenue for the undelivered items based on
vendor specific objective evidence (“VSOE”) of the
fair value of the undelivered elements, and recognize the
difference between the total arrangement fee and the amount
deferred for the undelivered items as revenue. Our deferred
revenue consists primarily of the unamortized balance of
enterprise product maintenance, consumer product content
updates, and arrangements where VSOE does not exist. Deferred
revenue totaled approximately $3.1 billion as of
April 3, 2009, of which $419 million was classified as
“Long-term deferred revenue” in the Consolidated
Balance Sheets. VSOE of each element is based on the price for
which the undelivered element is sold separately. We determine
fair value of the undelivered elements based on historical
evidence of our stand-alone sales of these elements to third
parties or from the stated renewal rate for the undelivered
elements. When VSOE does not exist for undelivered items, such
as maintenance, then the entire arrangement fee is recognized
ratably over the performance period. Changes to the elements in
a software arrangement, the ability to identify VSOE for those
elements, the fair value of the respective elements, and the
degree of flexibility in contractual arrangements could
materially impact the amount recognized in the current period
and deferred over time.
For our consumer products that include content updates, we
recognize revenue and the associated cost of revenue ratably
over the term of the subscription upon sell-through to
end-users, as the subscription period commences upon sale to an
end-user. We defer revenue and cost of revenue amounts for
unsold product held by our distributors and resellers.
We expect our distributors and resellers to maintain adequate
inventory of consumer packaged products to meet future customer
demand, which is generally four or six weeks of customer demand
based on recent buying trends. We ship product to our
distributors and resellers at their request and based on valid
purchase orders. Our distributors and resellers base the
quantity of orders on their estimates to meet future customer
demand, which may exceed the expected level of a four or six
week supply. We offer limited rights of return if the inventory
held by our distributors and resellers is below the expected
level of a four or six week supply. We estimate future returns
under these limited rights of return in accordance with
Statement of Financial Accounting Standard (“SFAS”)
No. 48, Revenue Recognition When Right of Return Exists.
We typically offer liberal rights of return if inventory
held by our distributors and resellers exceeds the expected
level. Because we cannot reasonably estimate the amount of
excess inventory that will be returned, we primarily offset
deferred revenue against trade accounts receivable for the
amount of revenue in excess of the expected inventory levels.
Reserves for product returns. We reserve for
estimated product returns as an offset to revenue based
primarily on historical trends. We fully reserve for obsolete
products in the distribution channels as an offset to deferred
revenue for products with content updates and to revenue for all
other products. If we made different estimates, material
differences could result in the amount and timing of our net
revenues for any period presented. More or less product may be
returned than what was estimated
and/or the
amount of inventory in the channel could be different than what
was estimated. These factors and unanticipated changes in the
economic and industry environment could make actual results
differ from our return estimates.
Reserves for rebates. We estimate and record
reserves for channel and end-user rebates as an offset to
revenue. For consumer products that include content updates,
rebates are recorded as a ratable offset to revenue over the
term of the subscription. Our estimated reserves for channel
volume incentive rebates are based on distributors’ and
resellers’ actual performance against the terms and
conditions of volume incentive rebate programs, which are
typically entered into quarterly. Our reserves for end-user
rebates are estimated based on the terms and conditions of the
promotional programs, actual sales during the promotion, amount
of actual redemptions received, historical redemption trends by
product and by type of promotional program, and the value of the
rebate. We also consider current market conditions and economic
trends when estimating our reserves for rebates. If actual
redemptions
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differ from our estimates, material differences may result in
the amount and timing of our net revenues for any period
presented.
When we acquire businesses, we allocate the purchase price to
tangible assets and liabilities and identifiable intangible
assets acquired. Any residual purchase price is recorded as
goodwill. The allocation of the purchase price requires
management to make significant estimates in determining the fair
values of assets acquired and liabilities assumed, especially
with respect to intangible assets. These estimates are based on
historical experience and information obtained from the
management of the acquired companies. These estimates can
include, but are not limited to, the cash flows that an asset is
expected to generate in the future, the appropriate
weighted-average cost of capital, and the cost savings expected
to be derived from acquiring an asset. These estimates are
inherently uncertain and unpredictable. In addition,
unanticipated events and circumstances may occur which may
affect the accuracy or validity of such estimates.
Goodwill. As of April 3, 2009, goodwill
was $4.6 billion. We review goodwill for impairment on an
annual basis and on an interim basis whenever events or changes
in circumstances indicate that the carrying value may not be
recoverable in accordance with SFAS No. 142,
Goodwill and Other Intangible Assets
(“SFAS No. 142”). The provisions of
SFAS No. 142 require that a two-step impairment test
be performed on goodwill. In the first step, we compare the
estimated fair value of each reporting unit to its allocated
carrying value (book value). If the carrying value of the
reporting unit exceeds the fair value of the equity assigned to
that unit, there is an indicator of impairment and we must
perform the second step of the impairment test, which requires
determining the implied fair value of that reporting unit’s
goodwill in a manner similar to a purchase price allocation for
an acquired business. If the carrying value of the reporting
unit’s goodwill exceeds its implied fair value, then we
would record an impairment loss equal to the excess.
Our reporting units are identified in accordance with
SFAS No. 142 and are either equivalent to, or
represent one level below, an operating segment. Each reporting
unit constitutes a business for which discrete financial
information is available and for which segment management
regularly reviews the operating results. Our operating segments
are significant strategic business units that offer different
products and services, distinguished by customer needs. Our
reporting units are consistent with our operating segments,
except for the Services segment, which includes the SaaS and the
Services reporting units. The SaaS reporting unit is new for
fiscal 2009 and was primarily the result of an acquisition
during the year.
Prior to performing our second step in the goodwill impairment
analysis, we perform an assessment of long-lived assets for
impairment. Such long-lived assets include tangible and
intangible assets recorded in accordance with
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets and SFAS No. 86,
Accounting for the Costs of Software to Be Sold, Leased of
Otherwise Marketed.
The process of evaluating the potential impairment of goodwill
requires significant judgment at many points during the
analysis. In determining the carrying value of the reporting
units, we had to apply judgment to allocate the assets and
liabilities, such as accounts receivable and property and
equipment, based on specific identification or relevant driver,
as they are not held by those reporting units but by functional
departments. Goodwill was allocated to the reporting units based
on a combination of specific identification and relative fair
values, which is consistent with the methodology utilized in the
prior year impairment analysis. The use of relative fair values
was necessary for certain reporting units due to changes in our
operating structure in prior years. Furthermore, to determine
the reporting units’ fair value, we use the income approach
under which we calculate the fair value of each reporting unit
based on the estimated discounted future cash flows of that
unit. The income approach was determined to be the most
representative valuation technique that would be utilized by a
market participant in an assumed transaction, but the results
are corroborated with the market approach which measures the
value of an asset through an analysis of recent sales or
offerings of comparable property. When applied to the valuation
of equity interests, consideration is given to the financial
condition and operating performance of the company being
appraised relative to those of publicly traded companies
operating in the same or similar lines of business, potentially
subject to corresponding economic, environmental, and political
factors and considered to be reasonable investment alternatives.
We also consider our market capitalization on the date we
perform our analysis. Significant assumptions are based on
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historical and forecasted amounts specific to each reporting
unit, and consider estimates of cash flows, including revenues,
operating costs, growth rates and other relevant factors, as
well as discount rates to be applied. Although our cash flow
forecasts are based on assumptions that are consistent with the
plans and estimates we are using to manage the underlying
reporting units, there is significant judgment in determining
the cash flows attributable to these reporting units over their
remaining useful lives.
Based on a combination of factors, including the current
economic environment and a decline in our market capitalization,
we concluded that there were sufficient indicators to require us
to perform an interim goodwill impairment analysis during the
third quarter of fiscal 2009. The analysis was not completed
during the third quarter of fiscal 2009 and an estimated
impairment charge of $7.0 billion was recorded. The
analysis was subsequently finalized and an additional impairment
charge of $413 million was included in our results for the
fourth quarter of fiscal 2009. As a result, we incurred a total
impairment charge of $7.4 billion for fiscal 2009. We also
performed our annual impairment analysis during the fourth
quarter of fiscal 2009 and determined that no additional
impairment charge was necessary.
The methodology applied in the current year analyses was
consistent with the methodology applied in the prior year
analysis, but was based on updated assumptions, as appropriate.
As a result of the downturn in the economic environment during
the second half of calendar 2008, determining the fair value of
the individual reporting units was even more judgmental than in
the past. In particular, the global economic recession has
reduced our visibility into long-term trends and consequently,
estimates of future cash flows used in the current year analyses
are lower than those used in the prior year analysis. The
discount rates utilized in the analysis also reflect
market-based estimates of the risks associated with the
projected cash flows of individual reporting units and were
increased from the prior year analysis to reflect increased risk
due to current volatility in the economic environment.
If there are changes to the methods used to allocate carrying
values, if management’s estimates of future operating
results change, if there are changes in the identified reporting
units or if there are changes to other significant assumptions,
the estimated carrying values for each reporting unit and the
estimated fair value of our goodwill could change significantly,
and could result in an impairment charge. Such changes could
also result in goodwill impairment charges in future periods,
which could have a significant impact on our operating results
and financial condition therein.
Intangible Assets. We assess the impairment of
identifiable intangible assets according to SFAS Nos. 142
or 144, as appropriate, whenever events or changes in
circumstances indicate that an asset’s carrying amount may
not be recoverable. An impairment loss would be recognized when
the sum of the undiscounted estimated future cash flows expected
to result from the use of the asset and its eventual disposition
is less than its carrying amount. Such impairment loss would be
measured as the difference between the carrying amount of the
asset and its fair value. Our cash flow assumptions are based on
historical and forecasted revenue, operating costs, and other
relevant factors. If management’s estimates of future
operating results change, or if there are changes to other
assumptions, the estimate of the fair value of our acquired
product rights and other identifiable intangible assets could
change significantly. Such change could result in impairment
charges in future periods, which could have a significant impact
on our operating results and financial condition.
We account for developed technology or acquired product rights
in accordance with SFAS No. 86. We record
impairment charges on acquired product rights when we determine
that the net realizable value of the assets may not be
recoverable. To determine the net realizable value of the
assets, we use the estimated future gross revenues from each
product. Our estimated future gross revenues of each product are
based on company forecasts and are subject to change.
Long-Lived Assets (including Assets Held for
Sale). We account for long-lived assets in
accordance with SFAS No. 144. We record
impairment charges on long-lived assets to be held and used when
we determine that the carrying value of the long-lived assets
may not be recoverable. Based upon the existence of one or more
indicators of impairment, we measure any impairment of
long-lived assets based on a projected undiscounted cash flow
method using assumptions determined by our management to be
commensurate with the risk inherent in our current business
model. Our estimates of cash flows require significant judgment
based on our historical results and anticipated results and are
subject to many triggering factors which could change and cause
a material impact to our operating results or financial
condition. We record impairment charges on long-lived assets to
be held for sale when
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we determine that the carrying value of the long-lived assets
may not be recoverable. In determining our fair value, we obtain
market value appraisal information from third-parties.
Beginning in the first fiscal quarter of 2009, the assessment of
fair value for our financial instruments is based on the
provisions of SFAS No. 157, Fair Value
Measurements. SFAS No. 157 establishes a fair
value hierarchy that is based on three levels of inputs and
requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair
value.
We use inputs such as actual trade data, benchmark yields,
broker/dealer quotes and other similar data which are obtained
from independent pricing vendors, quoted market prices or other
sources to determine the ultimate fair value of our assets and
liabilities. We use such pricing data as the primary input, to
which we have not made any material adjustments, to make our
assessments and determinations as to the ultimate valuation of
our investment portfolio, and we are ultimately responsible for
the financial statements and underlying estimates. The fair
value and inputs are reviewed for reasonableness, may be further
validated by comparison to publicly available information and
could be adjusted based on market indices or other information
that management deems material to their estimate of fair value.
As of April 3, 2009, our financial instruments measured at
fair value on a recurring basis included $1.5 billion of
assets. Our cash equivalents primarily consist of money market
funds, bank securities, and government notes and represent 98%
of our total financial instruments measured at fair value on a
recurring basis.
As of April 3, 2009, $392 million of investments were
classified as Level 1, most of which represents investments
in money market funds. These were classified as Level 1
because their valuations were based on quoted prices for
identical securities in active markets. Determining fair value
for Level 1 instruments generally does not require
significant management judgment.
As of April 3, 2009, $1.1 billion of investments were
classified as Level 2, of which $474 million and
$654 million (98% together of total financial instruments
fair valued on a recurring basis) represent investments in
corporate securities and government securities, respectively.
These were classified as Level 2 because either
(1) the estimated fair value is based on the fair value of
similar securities or (2) their valuations were based on
pricing models with all significant inputs derived from or
corroborated by observable market prices for identical
securities in markets with insufficient volume or infrequent
transactions (less active markets). Level 2 inputs
generally are based on non-binding market consensus prices that
are corroborated by observable market data; quoted prices for
similar instruments;
and/or
model-derived valuations in which all significant inputs are
observable or can be derived principally from or corroborated
with observable market data for substantially the full term of
the assets or liabilities or quoted prices for similar assets or
liabilities. While determining the fair value for Level 2
instruments does not necessarily require significant management
judgment, it generally involves the following level of judgment
and subjectivity:
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As of April 3, 2009, we have no financial instruments with
unobservable inputs as classified in Level 3 under the
SFAS No. 157 hierarchy. Level 3 instruments
generally would include unobservable inputs to be used in the
valuation methodology that are significant to the measurement of
fair value of assets or liabilities. The determination of fair
value for Level 3 instruments requires the most management
judgment and subjectivity.
We account for stock-based compensation in accordance with
SFAS No. 123R, Share-Based Payment. Under the
fair value recognition provisions of this statement, stock-based
compensation is measured at the grant date based on the fair
value of the award and is recognized as expense over the
requisite service period, which is generally the vesting period
of the respective award.
Determining the fair value of stock-based awards at the grant
date requires judgment. We use the Black-Scholes option-pricing
model to determine the fair value of stock options. The
determination of the fair value of stock-based awards on the
date of grant using an option-pricing model is affected by our
stock price as well as assumptions regarding a number of complex
and subjective variables. These variables include our expected
stock price volatility over the term of the awards, actual and
projected employee stock option exercise and cancellation
behaviors, risk-free interest rates, and expected dividends.
We estimate the expected life of options granted based on an
analysis of our historical experience of employee exercise and
post-vesting termination behavior considered in relation to the
contractual life of the option. Expected volatility is based on
the average of historical volatility for the period commensurate
with the expected life of the option and the implied volatility
of traded options. The risk free interest rate is equal to the
U.S. Treasury constant maturity rates for the period equal
to the expected life. We do not currently pay cash dividends on
our common stock and do not anticipate doing so in the
foreseeable future. Accordingly, our expected dividend yield is
zero.
In accordance with SFAS No. 123R, we only record
stock-based compensation expense for awards that are expected to
vest. As a result, judgment is also required in estimating the
amount of stock-based awards that are expected to be forfeited.
Although we estimate forfeitures based on historical experience,
actual forfeitures may differ. If actual results differ
significantly from these estimates, stock-based compensation
expense and our results of operations could be materially
impacted when we record a
true-up for
the difference in the period that the awards vest.
We evaluate contingent liabilities including threatened or
pending litigation in accordance with SFAS No. 5,
Accounting for Contingencies. We assess the likelihood of
any adverse judgments or outcomes from a potential claim or
legal proceeding, as well as potential ranges of probable
losses, when the outcomes of the claims or proceedings are
probable and reasonably estimable. A determination of the amount
of accrued liabilities required, if any, for these contingencies
is made after the analysis of each separate matter. Because of
uncertainties related to these matters, we base our estimates on
the information available at the time of our assessment. As
additional information becomes available, we reassess the
potential liability related to its pending claims and litigation
and may revise our estimates. Any revisions in the estimates of
potential liabilities could have a material impact on our
operating results and financial position.
We account for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes. The
provision for income taxes is computed using the asset and
liability method, under which deferred tax assets and
liabilities are recognized for the expected future tax
consequences of temporary differences between the financial
reporting and tax bases of assets and liabilities, and for
operating loss and tax credit carryforwards in each jurisdiction
in which we operate. Deferred tax assets and liabilities are
measured using the currently enacted tax rates that apply to
taxable
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income in effect for the years in which those tax assets are
expected to be realized or settled. We record a valuation
allowance to reduce deferred tax assets to the amount that is
believed more likely than not to be realized.
We are required to compute our income taxes in each federal,
state, and international jurisdiction in which we operate. This
process requires that we estimate the current tax exposure as
well as assess temporary differences between the accounting and
tax treatment of assets and liabilities, including items such as
accruals and allowances not currently deductible for tax
purposes. The income tax effects of the differences we identify
are classified as current or long-term deferred tax assets and
liabilities in our Consolidated Balance Sheets. Our judgments,
assumptions, and estimates relative to the current provision for
income tax take into account current tax laws, our
interpretation of current tax laws, and possible outcomes of
current and future audits conducted by foreign and domestic tax
authorities. Changes in tax laws or our interpretation of tax
laws and the resolution of current and future tax audits could
significantly impact the amounts provided for income taxes in
our Consolidated Balance Sheets and Consolidated Statements of
Operations. We must also assess the likelihood that deferred tax
assets will be realized from future taxable income and, based on
this assessment, establish a valuation allowance, if required.
Our determination of our valuation allowance is based upon a
number of assumptions, judgments, and estimates, including
forecasted earnings, future taxable income, and the relative
proportions of revenue and income before taxes in the various
domestic and international jurisdictions in which we operate. To
the extent we establish a valuation allowance or change the
valuation allowance in a period, we reflect the change with a
corresponding increase or decrease to our tax provision in our
Consolidated Statements of Operations, or to goodwill to the
extent that the valuation allowance related to tax attributes of
the acquired entities.
In July 2008, we reached an agreement with the Internal Revenue
Service (“IRS”) concerning our eligibility to claim a
lower tax rate on a distribution made from a Veritas foreign
subsidiary prior to the July 2005 acquisition. The distribution
was intended to be made pursuant to the American Jobs Creation
Act of 2004, and therefore eligible for a 5.25% effective
U.S. federal rate of tax, in lieu of the 35% statutory
rate. The final impact of this agreement is not yet known since
this relates to the taxability of earnings that are otherwise
the subject of the tax years
2000-2001
transfer pricing dispute which in turn is being addressed in the
U.S. Tax Court. To the extent that we owe taxes as a result
of the transfer pricing dispute, we anticipate that the
incremental tax due from this negotiated agreement will
decrease. We currently estimate that the most probable outcome
from this negotiated agreement will be $13 million or less,
for which an accrual has already been made. We made a payment of
$130 million to the IRS for this matter in May 2006. We
applied $110 million of this payment as a deposit on the
outstanding transfer pricing matter for the tax years
2000-2001.
RESULTS
OF OPERATIONS
Total Net
Revenues
Net revenues increased for fiscal 2009 as compared to fiscal
2008 primarily due to a $301 million increase in Content,
subscriptions, and maintenance revenues. This increase was
primarily related to increased revenues in our Storage and
Server Management and Services segments. In addition, revenues
for fiscal 2009 benefited from additional amortization of
deferred revenue of approximately $75 million as a result
of fiscal 2009 comprising 53 weeks as compared to
52 weeks in fiscal 2008. The global economic slowdown has
increased competitive pricing pressure and the lead time to
close on sales for some of our products. While we cannot predict
the intensity or duration of this slowdown, we believe the
recurring nature of our business and the mission-critical nature
of our products position us well in this challenging environment.
Net revenues increased for fiscal 2008 as compared to fiscal
2007 primarily due to a $644 million increase in Content,
subscriptions, and maintenance revenues coupled with a
$31 million increase in Licenses revenues. These increases
were primarily related to increased revenues in our Storage and
Server Management, Security and Compliance, and Consumer
segments as a result of higher beginning deferred revenue
balances and increased sales.
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Included in the increase noted above is $194 million due to
the sales of new products and services from our Altiris
acquisition for which there is no comparable revenue in the
prior period. The increase is also due to a favorable foreign
currency impact. We also benefited in fiscal 2008 from a higher
deferred revenue balance compared to fiscal 2007.
Content, subscriptions, and maintenance revenues increased for
fiscal 2009 as compared to fiscal 2008 primarily due to an
aggregate increase in revenue from the Storage and Server
Management and Services segments of $246 million. The
increase in these two segments’ revenue is largely
attributable to demand for our Storage and Server Management
products and consulting services as a result of increased demand
for security and storage solutions. This increased demand was
driven by the proliferation of structured and unstructured data,
and increasing sales of services in conjunction with our license
sales as a result of our focus on offering our customers a more
comprehensive IT solution. Furthermore, growth in our customer
base through acquisitions and new license sales results in an
increase to Content, subscriptions, and maintenance revenues
because a large number of our customers renew their annual
maintenance contracts.
Content, subscriptions, and maintenance revenues increased in
fiscal 2008 as compared to fiscal 2007 primarily due to an
increase of $394 million in revenue related to enterprise
products and services, excluding acquired Altiris products. This
increase in enterprise product and services revenue was largely
attributable to higher amortization of deferred revenue, as a
result of our larger deferred revenue balances during fiscal
2008 compared to fiscal 2007. In addition, Content,
subscriptions, and maintenance revenues increased from sales of
new products from our Altiris acquisition for which there is no
comparable revenue in the prior period. The increase is also due
to a favorable foreign currency impact for fiscal 2008 compared
to fiscal 2007.
Licenses revenues decreased slightly for fiscal 2009 as compared
to fiscal 2008 primarily due to a decrease in revenue related to
our Security and Compliance products offset by an increase in
revenue related to our Storage and Server Management products.
The decreases in Security and Compliance license revenues are
primarily a result of the challenging economic environment and a
decline in demand from small and medium businesses. Offsetting
increases in Storage and Server Management license revenues are
a result of increased demand for storage solutions driven by the
proliferation of structured and unstructured data.
Licenses revenue increased in fiscal 2008 as compared to fiscal
2007 primarily due to an increase from the sales of new products
from our Altiris acquisition for which there is no comparable
revenue in the prior period and a favorable foreign currency
impact.
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Net
revenues and operating income by segment
Consumer revenues increased for fiscal 2009 as compared to
fiscal 2008 primarily due to an increase from our core consumer
security products in our electronic channels, offset by a
decrease in our retail channels. Our electronic channels include
sales derived from OEMs, subscriptions, upgrades, online sales,
and renewals. In addition, Consumer revenues increased from the
sale of our consumer services and acquired security products.
Consumer revenues increased for fiscal 2008 compared to fiscal
2007 due to an aggregate increase from our core consumer
security products in our electronic channels. The increase was
also due to a favorable foreign currency impact.
Operating income for this segment increased for fiscal 2009 as
compared to fiscal 2008, as the increase in revenue more than
offset the increase in expenses. Total expenses for fiscal 2009
increased primarily as a result of the PC Tools acquisition.
Operating income for this segment increased for fiscal 2008 as
compared to fiscal 2007, as the increase in revenue more than
offset the increase in expenses. Total expenses for fiscal 2008
increased primarily as a result of higher OEM placement fees.
Security and Compliance revenues were flat for fiscal 2009 as
compared to fiscal 2008.
Security and Compliance revenues increased for fiscal 2008 as
compared to fiscal 2007 primarily due to sales of new products
from our Altiris acquisition for which there is no comparable
revenue in the prior period. Included in the total Security and
Compliance segment revenue increase for fiscal 2008 is a
favorable foreign currencies impact.
Operating income for the Security and Compliance segment
increased for fiscal 2009 as compared to fiscal 2008, as
expenses decreased while revenue growth remained relatively
flat. Total expenses for fiscal 2009 benefited from continued
cost containment measures.
Operating income for this segment increased for fiscal 2008 as
compared to fiscal 2007, as the increase in revenues more than
offset the increase in expenses. Total expenses increased
primarily as a result of higher salary and commissions which
includes the impact of the fiscal 2008 Altiris and Vontu
acquisitions.
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Storage and Server Management revenues increased for fiscal 2009
as compared to fiscal 2008 primarily due to increased sales of
products related to storage management, data protection,
disaster recovery and products supporting high availability. The
demand for these products is driven by the increase in the
proliferation of structured and unstructured data as well as the
increasing demand for optimization of storage systems.
Storage and Server Management revenues increased for fiscal 2008
as compared to fiscal 2007 primarily due to increased demand for
products related to the standardization and simplification of
data center infrastructure and higher amortization of deferred
revenue, for the reasons discussed above in “Total Net
Revenues.” Included in the total Storage and Server
Management segment revenue increase for fiscal 2008 is a
favorable foreign currencies impact.
Operating income for the Storage and Server Management segment
increased for the fiscal 2009 as compared to the fiscal 2008, as
revenue growth was coupled with a decrease in expenses. Total
expenses for the fiscal 2009 decreased partly as a result of the
fiscal 2008 divestiture of the APM business.
Operating income for this segment increased for fiscal 2008 as
compared to fiscal 2007, as the increase in revenues more than
offset the increase in expenses. Total expenses from our Storage
and Server Management segment increased primarily as a result of
the impairment of intangible assets related to the APM business
of $95 million. Additionally, increases in sales expenses
drove costs higher for the Storage and Server Management group.
Services revenues increased for fiscal 2009 as compared to
fiscal 2008 primarily due to an increase in SaaS revenues as a
result of our November 14, 2008 acquisition of MessageLabs.
The remaining increase in revenues was in our consulting
services and Business Critical Services, as a result of
increased demand for more comprehensive software implementation
assistance and increased demand for our Business Critical
Services. Customers are increasingly purchasing our service
offerings in conjunction with the purchase of our products and
augmenting the capabilities of their own IT staff with our
onsite consultants.
Services revenues increased for fiscal 2008 compared to fiscal
2007 primarily due to an increase in consulting services as a
result of increased demand for a more comprehensive solution by
purchasing our service offerings in conjunction with the
purchase of our products and the increased desire for customers
to augment the capabilities of their own IT staff with our
onsite consultants. Services revenues increased as a result of
sales of new services from
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our Altiris acquisition for which there is no comparable revenue
in the prior period. In addition, Services revenue increased due
to increased demand for our Business Critical Services.
The operating loss for the Services segment decreased for the
fiscal 2009, as revenue growth exceeded expense growth for the
segment. Our focus on margin improvement contributed to the
decrease in operating loss.
Operating loss for this segment decreased for fiscal 2008 as
compared to fiscal 2007, as the increase in revenues more than
offset the increase in expenses. Total expenses from our
Services segment increased $80 million in fiscal 2008 as
compared to fiscal 2007. The increase is primarily a result of
higher salary and wages to support the increase in revenue and
includes the impact of the fiscal 2008 Altiris acquisition.
Revenue from our Other segment is comprised primarily of sunset
products and products nearing the end of their life cycle. Our
Other segment also includes general and administrative expenses;
amortization of acquired product rights, intangible assets, and
other assets; goodwill impairment charges; charges such as
stock-based compensation and restructuring; and certain indirect
costs that are not charged to the other operating segments. The
operating loss of our Other segment for fiscal 2009 primarily
consists of the $7.4 billion charge related to impairment
of goodwill that was recorded during fiscal 2009.
Revenues from the Other segment for fiscal 2008 compared to
fiscal 2007 were immaterial.
Americas revenues increased for fiscal 2009 as compared to
fiscal 2008 primarily due to increased revenues related to our
Storage and Server Management and Services segments. In
addition, for fiscal 2009 as compared to fiscal 2008, Americas
revenues related to our Consumer segment increased driven by
demand for our Consumer segment products suites.
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EMEA revenues decreased slightly for fiscal 2009 as compared to
fiscal 2008 primarily due to decreased revenues related to our
Consumer and Security and Compliance segments as a result of a
strengthening U.S. dollar and a decrease in endpoint
security product sales to small and medium sized businesses.
This decrease was partially offset by an increase in revenues
related to our Storage and Server Management and Services
segments.
Asia Pacific Japan revenues increased for fiscal 2009 as
compared to fiscal 2008 primarily due to increased revenues
related to our Storage and Server Management segment.
International revenues increased in fiscal 2008 as compared to
fiscal 2007 primarily due to increased revenues related to our
Storage and Server Management and Security and Compliance
segments, as a result of increased demand for products related
to the standardization and simplification of data center
infrastructure and higher amortization of deferred revenue for
the reasons described above. These products also contributed to
the increased revenues in the Americas in fiscal 2008 as
compared to fiscal 2007. Sales of new products from our
acquisition of Altiris increased revenues in the international
regions and the Americas for which there is no comparable
revenue in the prior period. Growth in revenues in international
regions and the Americas from sales of our Consumer products was
driven by prior period demand for Norton Internet Security
products. Foreign currencies had a favorable impact on net
revenues in fiscal 2008 compared to fiscal 2007.
Our international sales are and will continue to be a
significant portion of our net revenues. As a result, net
revenues will continue to be affected by foreign currency
exchange rates as compared to the U.S. dollar. While the
current global economic slowdown has recently resulted in a
strengthening U.S. dollar, we are unable to predict the
extent to which revenues in future periods will be impacted by
changes in foreign currency exchange rates. If international
sales become a greater portion of our total sales in the future,
changes in foreign currency exchange rates may have a greater
impact on our revenues and operating results.
Cost of
Revenues
Cost of revenues consists primarily of the amortization of
acquired product rights, fee-based technical support costs, the
costs of billable services, payments to OEMs under
revenue-sharing arrangements, manufacturing and direct material
costs, and royalties paid to third parties under technology
licensing agreements.
Gross margin increased slightly in fiscal 2009 as compared to
fiscal 2008 primarily due to higher revenues and, to a lesser
extent, lower OEM royalty payments and distribution costs,
partially offset by a year over year increase in technical
support costs.
Gross margin increased in fiscal 2008 as compared to fiscal 2007
due primarily to an increase in revenue and the fact that the
terms of several of our OEM arrangements changed from
revenue-sharing arrangements to placement fee arrangements in
late fiscal 2007. Placement fee arrangements are expensed on an
estimated average cost basis, while revenue-sharing arrangements
are generally amortized ratably over a one-year period. In
addition, we realized year over year increases in services and
technical support costs.
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Cost of content, subscriptions, and maintenance consists
primarily of fee-based technical support costs, costs of
billable services, and payments to OEMs under revenue-sharing
agreements.
Cost of content, subscriptions, and maintenance as a percentage
of related revenue for the fiscal 2009 decreased one percentage
point as compared to the same period last year. The decrease is
primarily driven by higher revenues, lower OEM royalties and
distribution costs, partially offset by a
year-over-year
increase in technical support costs.
Cost of content, subscriptions, and maintenance decreased as a
percentage of the related revenue in fiscal 2008 as compared to
fiscal 2007. The year over year decrease in cost of content,
subscriptions, and maintenance as a percentage of the related
revenue is primarily driven by higher revenues and lower OEM
royalties as a percentage of revenue more than offsetting
increases in Services expenses.
Cost of licenses consists primarily of royalties paid to third
parties under technology licensing agreements and manufacturing
and direct material costs.
Cost of licenses remained stable as a percentage of the related
revenue for the fiscal 2009 as compared to the fiscal 2008.
Decreases in manufacturing and site license costs were partially
offset by higher royalties.
Cost of licenses decreased as a percentage of the related
revenue in fiscal 2008 as compared to fiscal 2007. The year over
year decrease in Cost of licenses as a percentage of the related
revenue is primarily attributable to higher revenues and to a
lesser extent due to lower obsolescence reserves. Fiscal 2007
had relatively high obsolescence reserves due to our decision to
exit certain aspects of the appliance business.
Acquired product rights are comprised of developed technologies
and patents from acquired companies.
The increase in amortization for the fiscal 2009 as compared to
the fiscal 2008 is primarily due to amortization associated with
SwapDrive, PC Tools and MessageLabs acquisitions during the
fiscal 2009 periods offset in part by the APM business
divestiture in the fiscal 2008 period.
The amortization in fiscal 2008 was higher than fiscal 2007
primarily due to amortization associated with the Altiris
acquisition, offset in part by certain acquired product rights
becoming fully amortized. For further discussion of acquired
product rights and related amortization, see Notes 5 and 6
of the Notes to Consolidated Financial Statements in this annual
report.
Operating
Expenses
As discussed above under “Our Business,” our operating
expenses for fiscal 2009 as compared to fiscal 2008 were
adversely impacted by an additional week during fiscal 2009. Our
international expenses during the fiscal
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2009 were favorably impacted by the strengthening of the
U.S. dollar compared to foreign currencies during fiscal
2008 and by the 2009 restructuring plan. In addition, our
ongoing cost and expense discipline positively contributed to
our increased operating margins for the fiscal 2009 periods.
Our operating expenses for fiscal 2008 as compared to fiscal
2007 were adversely impacted by higher international expenses
resulting from the U.S. dollar weakening in comparison to
foreign currencies coupled with additional headcount resulting
from acquisitions. These increases were partially offset by our
2008 restructuring plan initiatives and our ongoing cost and
expense discipline.
As a percent of net revenues, sales and marketing expenses
decreased to 39% for the fiscal 2009 as compared to 41% for the
fiscal 2008 as a result of the factors discussed above under
“Operating expenses overview.”
Sales and marketing expense as a percentage of total revenues
increased to 41% in fiscal 2008 as compared to 39% in fiscal
2007. The percentage increase and increase in absolute dollars
in sales and marketing expenses in fiscal 2008 as compared to
fiscal 2007 is primarily due to higher employee compensation
expense as a result of the Altiris and Vontu acquisitions and
the OEM placement fees as discussed above under “Financial
Results and Trends.” We negotiated new contract terms with
some of our OEM partners in fiscal 2007, for which the expense
commenced being recognized in the fourth quarter of fiscal 2007.
In addition, these new contract terms had the effect of moving
our OEM payments from Cost of revenues to Operating expenses.
As a percent of net revenues, research and development expense
has remained relatively constant in fiscal 2009 and fiscal 2008.
Research and development expense as a percentage of total
revenues has remained relatively constant in fiscal 2008 and
fiscal 2007. The increase in absolute dollars in fiscal 2008 as
compared to fiscal 2007 is attributable to a higher employee
compensation expense primarily related to the Altiris and Vontu
acquisitions.
General and administrative expense as a percentage of total
revenues has remained relatively constant in fiscal 2009, fiscal
2008, and fiscal 2007. The decrease in general and
administrative expenses in fiscal 2009 as compared with the
fiscal 2008 is primarily due to items discussed above under
“Operating expenses overview.” The increase in
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general and administrative expenses in fiscal 2008 as compared
with fiscal 2007 is primarily due to higher salaries and wages
resulting from the Altiris and Vontu acquisitions offset by a
gradual reduction in headcount during fiscal 2008.
Other purchased intangible assets are comprised of customer base
and tradenames. Amortization for the fiscal 2009 compared to the
fiscal 2008 remained relatively stable. The increased
amortization in fiscal 2008 is primarily associated with a full
year of amortization of intangible assets associated with the
Altiris purchase which occurred in April 2007.
In connection with the restructuring plans described in
Note 9 of the Notes to Consolidated Financial Statements in
this annual report, restructuring charges increased to
$96 million for fiscal 2009 from $74 million in fiscal
2008. The 2009 restructuring amount primarily consisted of
severance charges of $64 million largely related to the
2009 Plan (as defined in Note 9) reduction in force
and the 2008 Plan business structure changes, $21 million
related to the outsourcing of back office functions to various
third-party outsourcers and $11 million related to
facilities costs associated with earlier acquisitions. The 2008
amount primarily consisted of severance charges of
$59 million largely related to the reduction in force
actions in both the 2008 Plan and 2007 Plan (each as defined in
Note 9) and $15 million related to facilities
costs associated with earlier acquisitions. Restructuring
charges increased slightly in fiscal 2008 from $71 million
in fiscal 2007. The 2007 amount primarily consisted of severance
charges related to the 2007 Plan reduction in force.
Total remaining costs for the 2008 Plan are estimated to range
from $25 million to $55 million. Total remaining costs
for the transition activities associated with outsourcing back
office functions are estimated to be approximately
$40 million. Total remaining costs related to the 2009 Plan
and 2007 Plan are not expected to be material.
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Based on a combination of factors, including the current
economic environment and a decline in our market capitalization,
we concluded that there were sufficient indicators to require us
to perform an interim goodwill impairment analysis during the
third quarter of fiscal 2009. The analysis was not completed
during the third quarter of fiscal 2009 and an estimated
impairment charge of $7.0 billion was recorded. The
analysis was subsequently finalized and an additional impairment
charge of $413 million was included in our results for the
fourth quarter of fiscal 2009. As a result, we incurred a total
impairment charge of $7.4 billion for fiscal 2009. We also
performed our annual impairment analysis during the fourth
quarter of fiscal 2009 and determined that no additional
impairment charge was necessary.
For the purposes of this analysis, our estimates of fair value
are based on a combination of the income approach, and the
market approach. The income approach estimates the fair value of
our reporting units based on the future discounted cash flows.
We also consider the market approach, which estimates the fair
value of our reporting units based on comparable market prices.
During the year ended April 3, 2009, we recognized an
impairment of $47 million on certain land and buildings
classified as held for sale. SFAS No. 144 provides
that a long-lived asset classified as held for sale should be
measured at the lower of its carrying amount or fair value less
cost to sell.
During the year ended March 28, 2007, we determined that
the APM business in the Storage and Server Management segment
did not meet the long-term strategic objectives of the segment.
As such, we recognized an impairment of $96 million,
primarily due to sale of the APM business during fiscal 2008.
During the third quarter of fiscal 2009, we settled a patent
lawsuit in which the result was a gain of approximately
$10 million reflected in the Consolidated Statement of
Operations under the caption “Patent settlement.”
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Interest income decreased during fiscal years 2009 and 2008
primarily due to lower average cash balances outstanding and
lower average yields on our invested cash and short-term
investment balances. We expect that our interest expense will
increase with the adoption of Financial Accounting Standards
Board (“FASB”) FSP APB
No. 14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). Please see “Newly Adopted and Recently
Issued Accounting Pronouncements” below.
Interest expense is primarily related to the interest and
amortization of issuance costs related to our 0.75% and
1.00% Convertible Senior Notes issued in June 2006. Fiscal
2007 also includes interest and accretion related to the
0.25% Convertible Subordinated Notes that we assumed in
connection with our acquisition of Veritas, which were paid in
full during August 2006.
In fiscal 2008, we recorded a net gain from Settlements of
litigation.
Other income, net includes a net gain of foreign currency for
fiscal 2009, while fiscal 2008 and fiscal 2007 include net
foreign currency losses. In fiscal 2007, Other income, net
includes a gain of $20 million on the sale of our buildings
in Milpitas, California, and Maidenhead, United Kingdom.
Our effective tax rate was approximately (3)%, 35%, and 36% in
fiscal 2009, 2008, and 2007, respectively. The tax provision for
fiscal 2009 includes a $56 million net tax benefit
associated with the impairment of goodwill charge of
$7.4 billion, materially impacting the overall effective
tax rate. The effective tax rate for fiscal 2009 otherwise
reflects the benefits of lower-taxed foreign earnings and losses
from the joint venture, domestic manufacturing tax incentives,
and research and development credits. The effective tax rate for
fiscal 2008 reflects the impact of non-deductible stock-based
compensation offset by U.S. tax benefits from domestic
manufacturing deductions. The effective tax rate for fiscal 2007
reflects the impact of non-deductible stock-based compensation
offset by foreign earnings taxed at a lower rate than the
U.S. tax rate.
The $56 million net tax benefit arising from the impairment
of goodwill during the year consists of a $112 million tax
benefit from elements of tax deductible goodwill, net of a
$56 million tax provision to increase our valuation
allowances for certain deferred tax assets in a foreign
jurisdiction that will require an extended period of time to
realize. The valuation allowance increased by $63 million
in total in fiscal 2009 and totals $101 million as of
April 3, 2009.
As a result of the impairment of goodwill, we have cumulative
pre-tax book losses, as measured by the current and prior two
years. We considered the negative evidence of this cumulative
pre-tax book loss position on our ability to continue to
recognize deferred tax assets that are dependent upon future
taxable income for realization. Levels of
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future taxable income are subject to the various risks and
uncertainties discussed in Part I, Item 1A, Risk
Factors, set forth in this annual report. We considered the
following as positive evidence: the vast majority of the
goodwill impairment is not deductible for tax purposes and thus
will not result in tax losses; we have a strong, consistent
taxpaying history; we have substantial U.S. federal income
tax carryback potential; and we have substantial amounts of
scheduled future reversals of taxable temporary differences from
our deferred tax liabilities. We have concluded that this
positive evidence outweighs the negative evidence and, thus,
that the deferred tax assets as of April 3, 2009 of
$702 million, after application of the valuation
allowances, are realizable on a “more likely than not”
basis.
On March 29, 2006, we received a Notice of Deficiency from
the Internal Revenue Service (“IRS”) claiming that we
owe $867 million of additional taxes, excluding interest
and penalties, for the 2000 and 2001 tax years based on an audit
of Veritas. On June 26, 2006, we filed a petition with the
U.S. Tax Court protesting the IRS claim for such additional
taxes. In the March 2007 quarter, we agreed to pay
$7 million out of $35 million originally assessed by
the IRS in connection with several of the lesser issues covered
in the assessment. The IRS agreed to waive the assessment of
penalties. During July 2008, we completed the trial phase of the
Tax Court case, which dealt with the remaining issue covered in
the assessment. At trial, the IRS changed its position with
respect to this remaining issue, decreasing the remaining amount
at issue from $832 million to $545 million, excluding
interest. We filed our post-trial briefs in October 2008 and
rebuttal briefs in November 2008 with the U.S. Tax Court.
We strongly believe the IRS’ position with regard to this
matter is inconsistent with applicable tax laws and existing
Treasury regulations, and that our previously reported income
tax provision for the years in question is appropriate. If, upon
resolution, the final assessment differs from our tax provision
the adjustment, including interest, would be accounted for
through income tax expense in the period the matter is resolved,
with the application of SFAS No. 141(Revised 2007),
Business Combinations
(“SFAS No. 141(R)”) effective in the
first quarter of our fiscal year 2010.
On March 30, 2006, we received notices of proposed
adjustments from the IRS with regard to an unrelated audit of
Symantec for fiscal 2003 and 2004. The IRS claimed that we owed
an incremental tax liability with regard to this audit of
$110 million, excluding penalties and interest. The
incremental tax liability primarily relates to transfer pricing
matters between Symantec and a foreign subsidiary. On
September 5, 2006, we executed a closing agreement with the
IRS with respect to the audit of Symantec’s fiscal 2003 and
2004 federal income tax returns. The closing agreement
represents the final assessment by the IRS of additional tax for
these fiscal years of approximately $35 million, including
interest. Based on the final settlement, a tax benefit of
$8 million was recognized.
In July 2008, we reached an agreement with the IRS concerning
our eligibility to claim a lower tax rate on a distribution made
from a Veritas foreign subsidiary prior to the July 2005
acquisition. The distribution was intended to be made pursuant
to the American Jobs Creation Act of 2004, and therefore
eligible for a 5.25% effective U.S. federal rate of tax, in
lieu of the 35% statutory rate. The final impact of this
agreement is not yet known since this relates to the taxability
of earnings that are otherwise the subject of the tax years
2000-2001
transfer pricing dispute which in turn is being addressed in the
U.S. Tax Court. To the extent that we owe taxes as a result
of the transfer pricing dispute, we anticipate that the
incremental tax due from this negotiated agreement will
decrease. We currently estimate that the most probable outcome
from this negotiated agreement will be $13 million or less,
for which an accrual has already been made. We made a payment of
$130 million to the IRS for this matter in May 2006. We
have applied $110 million of this payment as a deposit on
the outstanding transfer pricing matter for the tax years
2000-2001.
In connection with the note hedge transactions discussed in
Note 8 of the Notes to Consolidated Financial Statements in
this annual report, we established a deferred tax asset of
approximately $232 million to account for the book-tax
basis difference in the convertible notes resulting from note
hedge transactions. The establishment of the deferred tax asset
has been accounted for as an increase to additional paid-in
capital. As a result of the adoption of FSP APB
No. 14-1
in the June 2009 quarter, book and tax basis in the convertible
notes will be comparable, and as a result, this deferred tax
asset will be adjusted through additional paid-in capital, as
part of the adoption.
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The Company adopted the provisions of FASB FIN 48,
Accounting for Uncertainty in Income Taxes, effective
March 31, 2007. FIN 48 addresses the accounting for
and disclosure of uncertainty in income tax positions, by
prescribing a minimum recognition threshold that a tax position
is required to satisfy before being recognized in the financial
statements. FIN 48 also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition.
The cumulative effect of adopting FIN 48 was a decrease in
tax reserves of $16 million, resulting in a decrease in
Veritas goodwill of $10 million, an increase of
$5 million to Accumulated earnings balance, and a
$1 million increase in Additional paid-in capital. Upon
adoption, the gross liability for unrecognized tax benefits as
of March 31, 2007 was $456 million, exclusive of
interest and penalties.
On February 5, 2008, Symantec formed Huawei-Symantec, Inc.
(“joint venture”) with a subsidiary of Huawei
Technologies Co., Ltd. (“Huawei”). The joint venture
is domiciled in Hong Kong with principal operations in Chengdu,
China. The joint venture develops, manufactures, markets and
supports security and storage appliances to global
telecommunications carriers and enterprise customers.
As described further in Note 7 of the Notes to Consolidated
Financial Statements in this annual report, we account for our
investment in the joint venture under the equity method of
accounting. Under this method, we record our proportionate share
of the joint venture’s net income or loss based on the
quarterly financial statements of the joint venture. We record
our proportionate share of net income or loss one quarter in
arrears. For the fiscal 2009, we recorded a loss of
approximately $53 million related to our share of the joint
venture’s net loss incurred for the period from
February 5, 2008 (its date of inception) to
December 31, 2008.
LIQUIDITY
AND CAPITAL RESOURCES
We have historically relied primarily on cash flows from
operations, borrowings under a credit facility, issuances of
convertible notes and equity securities for our liquidity needs.
Key sources of cash include earnings from operations and
existing cash, cash equivalents, short-term investments, and our
revolving credit facility.
In fiscal 2007, we entered into a five-year $1 billion
senior unsecured revolving credit facility that expires in July
2011. During fiscal 2008, we borrowed $200 million under
the credit facility. In order to be able to draw on the credit
facility, we must maintain certain covenants, including a
specified ratio of debt to earnings (before interest, taxes,
depreciation, and amortization and impairments) as well as
various other non-financial covenants. As of April 3, 2009,
we were in compliance with all required covenants, and there was
no outstanding balance on the credit facility.
As of April 3, 2009, we had cash and cash equivalents of
$1.8 billion and short-term investments of
$199 million resulting in a net liquidity position, defined
as unused availability of the credit facility, cash and cash
equivalents and short-term investments, of approximately
$3.0 billion.
We believe that our existing cash balances, cash that we
generate over time from operations, and our borrowing capacity
will be sufficient to satisfy our anticipated cash needs for
working capital and capital expenditures for at least the next
12 months.
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Our principal cash requirements include working capital, capital
expenditures, payments of principal and interest on our debt and
payments of taxes. In addition, we regularly evaluate our
ability to repurchase stock, pay debts and acquire other
businesses.
Revolving credit facility. In early fiscal
2009, we repaid the entire $200 million principal amount,
plus $3 million of accrued interest, that we borrowed
during fiscal 2008 under our senior unsecured revolving credit
facility.
Acquisition-Related. We generally use cash to
fund the acquisition of other businesses and from time to time
use our revolving credit facility when necessary. We acquired
six companies for cash totaling $1.1 billion in fiscal
2009, three companies for approximately $1.4 billion in
fiscal 2008 and two companies for approximately $46 million
in fiscal 2007. Also in fiscal 2008, we entered into a joint
venture with Huawei Technologies Co., Ltd. and contributed
$150 million in cash.
Convertible Senior Notes. In June 2006, we
issued $1.1 billion principal amount of
0.75% Convertible Senior Notes due June 15, 2011, and
$1.0 billion principal amount of 1.00% Convertible
Senior Notes (collectively the “Senior Notes”) due
June 15, 2013, to initial purchasers in a private offering
for resale to qualified institutional buyers pursuant to SEC
Rule 144A. Concurrently with the issuance of the Senior
Notes, we entered into note hedge transactions for
$592 million with affiliates of certain of the initial
purchasers whereby we have the option to purchase up to
110 million shares of our common stock at a price of $19.12
per share.
Stock Repurchases. During fiscal 2009, we
repurchased 42 million shares, or $700 million, of our
common stock. As of April 3, 2009, we have
$300 million remaining under the plan authorized by the
Board of Directors in June 2007. During fiscal 2008, we
repurchased a total of 81 million shares, or
$1.5 billion, of our common stock. During fiscal 2007, we
repurchased 162 million shares, or $2.8 billion, of
our common stock.
The following table summarizes, for the periods indicated,
selected items in our Consolidated Statements of Cash Flows:
Operating
Activities
Net cash provided by operating activities of $1.7 billion
during fiscal 2009 primarily resulted from non-cash charges
related to depreciation and amortization expenses of
$837 million and the $7.4 billion goodwill impairment
charge offset by the net loss of $6.7 billion.
Net cash provided by operating activities during fiscal 2008
resulted largely from net income of $464 million adjusted
for non-cash items — depreciation and amortization
charges of $824 million, stock-based compensation expense
of $164 million, income taxes payable of $197 million
and an increase in deferred revenue of $127 million. These
2008 amounts were partially offset by a decrease in non-cash
deferred income taxes of $180 million.
Net cash provided by operating activities during fiscal 2007
resulted largely from net income of $404 million adjusted
for non-cash items — depreciation and amortization of
$811 million, stock-based compensation expense of
$154 million and an increase in deferred revenue of
$400 million. These 2007 amounts were partially offset by a
decrease in income taxes payable of $182 million, primarily
due to the timing of tax payments.
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Investing
Activities
Net cash used in investing activities of $1.0 billion in
fiscal 2009 was primarily due to an aggregate payment of
$1.1 billion in cash payments for acquisitions, net of cash
acquired, and $272 million paid for capital expenditures,
partially offset by net proceeds of $336 million from the
sale of short-term investments which were used to partially fund
acquisitions.
Net cash used in investing activities of $1.5 billion for
2008 was primarily related to an aggregate payment of
$1.2 billion in cash paid for acquisitions and the joint
venture, net of cash acquired.
Net cash used in investing activities of $222 million in
fiscal 2007 was primarily due to a net increase in capital
expenditures of $298 million and $46 million in cash
paid for acquisitions, net of cash acquired, partially offset by
the net proceeds from sales of short-term investments of
$123 million.
Financing
Activities
Net cash used in financing activities of $676 million in
fiscal 2009 was primarily due to stock repurchases of
42 million shares of our common stock for $700 million
and the repayment of $200 million on our revolving credit
facility, partially offset by net proceeds of $229 million
received from the issuance of our common stock through employee
stock plans.
Net cash used in financing activities of $1.1 billion in
fiscal 2008 was primarily related to the repurchase of
81 million shares of our common stock for
$1.5 billion, partially offset by the net proceeds of
$224 million received from the issuance of our common stock
through employee stock plans and a borrowing of
$200 million on our revolving credit facility.
Net cash used in financing activities of $1.3 billion in
fiscal 2007 was primarily related to the repurchase of
162 million shares of our common stock for
$2.8 billion, the purchase of note hedges for
$592 million and repayment of the Veritas notes for
$520 million; partially offset by $2.1 billion
proceeds from the issuance of our Senior Notes, proceeds from
the sale of common stock warrants of $326 million and
$230 million proceeds from the issuance of our common stock
through employee stock plans.
Contractual
Obligations and Commitments
The following table summarizes our significant contractual
obligations and commitments as of April 3, 2009:
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As permitted under Delaware law, we have agreements whereby we
indemnify our officers and directors for certain events or
occurrences while the officer or director is, or was, serving at
our request in such capacity. The maximum potential amount of
future payments we could be required to make under these
indemnification agreements is not limited; however, we have
directors’ and officers’ insurance coverage that
reduces our exposure and may enable us to recover a portion of
any future amounts paid. We believe the estimated fair value of
these indemnification agreements in excess of applicable
insurance coverage is minimal.
We provide limited product warranties and the majority of our
software license agreements contain provisions that indemnify
licensees of our software from damages and costs resulting from
claims alleging that our software infringes the intellectual
property rights of a third party. Historically, payments made
under these provisions have been immaterial. We monitor the
conditions that are subject to indemnification to identify if a
loss has occurred.
In April 2009, the FASB issued (1) FSP
FAS 115-2
and FSP
FAS 124-2,
which provides guidance on determining
other-than-temporary
impairments for debt securities; and (2) FSP
FAS 107-1
and FSP APB
28-1, which
provides additional fair value disclosures for financial
instruments in interim periods. Each of these FSPs are effective
for interim and annual periods ending after June 15, 2009.
We do not expect the adoption of these FSPs to have a material
impact on our consolidated financial statements.
In June 2008, the FASB issued EITF Issue
No. 07-5,
Determining Whether an Instrument (or an Embedded Feature) Is
Indexed to an Entity’s Own Stock. EITF Issue
No. 07-5
provides guidance on evaluating whether an equity-linked
financial instrument (or embedded feature) is indexed to a
company’s own stock, including evaluating the
instrument’s contingent exercise and settlement provisions.
EITF Issue
No. 07-5
is effective for fiscal years beginning after December 15,
2008. We are currently assessing the impact of EITF Issue
No. 07-5
on our consolidated financial statements.
In May 2008, the FASB issued FSP APB
No. 14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). The FSP will require the issuer of convertible
debt instruments with cash settlement features to separately
account for the liability and equity components of the
instrument. The debt will be recognized at the present value of
its cash flows discounted using the issuer’s nonconvertible
debt borrowing rate at the time of issuance. The equity
component will be recognized as the difference between the
proceeds from the issuance of the note and the fair value of the
liability. The FSP will also require interest to be accreted as
interest expense of the resultant debt discount over the
expected life of the debt.
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The transition guidance requires retrospective application to
all periods presented, and does not grandfather existing
instruments. The guidance will be effective for fiscal years
beginning after December 15, 2008, and interim periods
within those years. As such, we will adopt the FSP in the first
quarter of fiscal year 2010. Our 0.75% Convertible Senior
Notes due June 15, 2011, and our 1.00% Convertible
Senior Notes due June 15, 2013 (collectively the
“Senior Notes”), each issued in June 2006, are subject
to the FSP.
Upon adoption, we will record a debt discount, which will be
amortized to interest expense through maturity of the Senior
Notes. Although we have not completed our evaluation of the
impact of adoption, we expect to retrospectively adjust the
original carrying amount of the Senior Notes as of June 2006 to
reflect a discount of approximately $586 million on the
date of issuance, with an offsetting increase in additional
paid-in capital of approximately $354 million and a
decrease in deferred tax assets of approximately
$232 million. Excluding the corresponding impact of income
taxes, we expect to retrospectively record an increase in
non-cash interest expense of approximately $91 million in
fiscal 2008 and approximately $97 million in fiscal 2009.
As a result of applying the FSP, we also expect non-cash
interest expense in fiscal 2010 to increase by approximately
$104 million, excluding the corresponding impact of income
taxes. The additional non-cash interest expense will have no
impact on the total operating, investing and financing cash
flows in prior periods or in future consolidated statements of
cash flows. If future interpretations of, or changes to, the FSP
necessitate a further change in these reporting practices, our
previously reported and future results of operations could be
adversely affected.
In May 2008, the FASB issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles.
SFAS No. 162 defines the order in which accounting
principles that are generally accepted should be followed.
SFAS No. 162 is effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight
Board (“PCAOB”) amendments to AU Section 411,
The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles. We do not expect the
adoption of SFAS No. 162 to have a material impact on
our consolidated financial statements.
In April 2008, the FASB finalized FSP
No. 142-3,
Determination of the Useful Life of Intangible Assets.
The position amends the factors that should be considered in
developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under FASB
SFAS No. 142. The position applies to intangible
assets that are acquired individually or with a group of other
assets and both intangible assets acquired in business
combinations and asset acquisitions.
FSP 142-3
is effective for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. We are
currently evaluating the impact of the pending adoption of
FSP 142-3
on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51. The standard
changes the accounting for noncontrolling (minority) interests
in consolidated financial statements including the requirements
to classify noncontrolling interests as a component of
consolidated stockholders’ equity, to identify earnings
attributable to noncontrolling interests reported as part of
consolidated earnings, and to measure gain or loss on the
deconsolidated subsidiary using the fair value of the
noncontrolling equity investment. Additionally,
SFAS No. 160 revises the accounting for both increases
and decreases in a parent’s controlling ownership interest.
SFAS No. 160 is effective for fiscal years beginning
after December 15, 2008, with early adoption prohibited. We
do not expect the adoption of SFAS No. 160 to have a
material impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141(R).
This standard changes the accounting for business combinations
by requiring that an acquiring entity measures and recognizes
identifiable assets acquired and liabilities assumed at the
acquisition date fair value with limited exceptions. The changes
include the treatment of acquisition related transaction costs,
the valuation of any noncontrolling interest at acquisition date
fair value, the recording of acquired contingent liabilities at
acquisition date fair value and the subsequent re-measurement of
such liabilities after acquisition date, the recognition of
capitalized in-process research and development, the accounting
for acquisition-related restructuring cost accruals subsequent
to the acquisition date, and the recognition of changes in the
acquirer’s income tax valuation allowance.
SFAS No. 141(R) is effective for fiscal years
beginning after December 15, 2008, with early adoption
prohibited. We are currently evaluating the impact of the
pending adoption of SFAS No. 141(R) on our
consolidated financial statements. The accounting treatment
related to pre-acquisition uncertain tax positions will change
when SFAS No. 141(R) becomes effective, which will be
in the first quarter of
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our fiscal year 2010. At such time, any changes to the
recognition or measurement of uncertain tax positions related to
pre-acquisition periods will be recorded through income tax
expense, where currently the accounting treatment would require
any adjustment to be recognized through the purchase price. In
April 2009, the FASB issued FSP No. FAS 141(R)-1,
Accounting for Assets Acquired and Liabilities Assumed in a
Business Combination That Arise from Contingencies. FSP
No. FAS 141(R)-1 provides guidance on the accounting
and disclosure of contingencies acquired or assumed in a
business combination. FSP No. FAS 141(R)-1 is
effective for fiscal years beginning after December 15,
2008. We are currently evaluating the impact of the pending
adoption of FSP No. FAS 141(R)-1 on our consolidated
financial statements. See Note 14 for further details.
In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment of SFAS No. 115.
SFAS No. 159 permits companies to choose to
measure certain financial instruments and certain other items at
fair value and requires unrealized gains and losses on items for
which the fair value option has been elected to be reported in
earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. Effective March 29,
2008, we adopted SFAS 159, but we have not elected the fair
value option for any eligible financial instruments as of
April 3, 2009.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements, which defines fair value,
establishes guidelines for measuring fair value and expands
disclosures regarding fair value measurements.
SFAS No. 157 does not require any new fair value
measurements but rather eliminates inconsistencies in guidance
found in various prior accounting pronouncements and is
effective for fiscal years beginning after November 15,
2007. In February 2008, the FASB issued FSP
No. 157-2,
The Effective Date of FASB Statement No. 157, which
delays the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), until
fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years. These nonfinancial items
include assets and liabilities such as reporting units measured
at fair value in a goodwill impairment test and nonfinancial
assets acquired and liabilities assumed in a business
combination. Effective March 29, 2008, we adopted
SFAS No. 157 for financial assets and liabilities
recognized at fair value on a recurring basis. The partial
adoption of SFAS No. 157 for financial assets and
liabilities did not have a material impact on our consolidated
financial position, results of operations or cash flows. In
October 2008, the FASB issued FSP
No. FAS 157-3,
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active. FSP
No. FAS 157-3
provides examples to illustrate key considerations in
determining the fair value of a financial asset when the market
for that financial asset is not active. FSP
No. FAS 157-3
is effective upon issuance. The adoption of the FSP did not have
a material impact on our consolidated financial statements. In
April 2009, the FASB issued FSP
No. FAS 157-4,
Determining Fair Value When the Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly. FSP
No. FAS 157-4
provides guidance on estimating fair value when the volume and
level of activity for an asset or liability have significantly
decreased and determining when a transaction is not orderly. FSP
No. FAS 157-4
is effective for interim and annual periods ending after
June 15, 2009. We do not expect adoption of the FSP to have
a material impact on our consolidated financial statements. See
Note 2 for information and related disclosures regarding
our fair value measurements.
We are exposed to various market risks related to fluctuations
in interest rates, foreign currency exchange rates, and equity
prices. We may use derivative financial instruments to mitigate
certain risks in accordance with our investment and foreign
exchange policies. We do not use derivatives or other financial
instruments for trading or speculative purposes.
Our exposure to interest rate risk relates primarily to our
short-term investment portfolio and the potential losses arising
from changes in interest rates. Our investment objective is to
achieve the maximum return compatible with capital preservation
and our liquidity requirements. Our strategy is to invest our
cash in a manner that preserves capital, maintains sufficient
liquidity to meet our cash requirements, maximizes yields
consistent with approved credit risk, and limits inappropriate
concentrations of investment by sector, credit, or issuer. We
classify our cash equivalents and short-term investments in
accordance with SFAS No. 115, Accounting for
Certain Investments in
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Debt and Equity Securities. We consider investments in
instruments purchased with an original maturity of 90 days
or less to be cash equivalents. We classify our short-term
investments as
available-for-sale,
and short-term investments consist of marketable debt or equity
securities with original maturities in excess of 90 days.
Our cash equivalents and short-term investment portfolios
consist primarily of money market funds, commercial paper,
corporate debt securities, and U.S. government and
government-sponsored debt securities. Our short-term investments
do not include equity investments in privately held companies.
Our short-term investments are reported at fair value with
unrealized gains and losses, net of tax, included in Accumulated
other comprehensive income within Stockholders’ equity in
the Consolidated Balance Sheets. The amortization of premiums
and discounts on the investments, realized gains and losses, and
declines in value judged to be
other-than-temporary
on
available-for-sale
securities are included in Other income, net in the Consolidated
Statements of Operations. We use the specific identification
method to determine cost in calculating realized gains and
losses upon sale of short-term investments.
The following table presents the fair value and hypothetical
changes in fair values on short-term investments sensitive to
changes in interest rates (in millions):
The modeling technique used above measures the change in fair
market value arising from selected potential changes in interest
rates. Market changes reflect immediate hypothetical parallel
shifts in the yield curve of plus 150 bps, plus
100 bps, plus 50 bps, minus 25 bps, and minus
75 bps.
We conduct business in 40 currencies through our worldwide
operations and, as such, we are exposed to foreign currency
exposure risk. Foreign currency risks are associated with our
cash and cash equivalents, investments, receivables, and
payables denominated in foreign currencies. Fluctuations in
exchange rates will result in foreign exchange gains and losses
on these foreign currency assets and liabilities and are
included in Other income, net. Our objective in managing foreign
exchange activity is to preserve stockholder value by minimizing
the risk of foreign currency exchange rate changes. Our strategy
is to primarily utilize forward contracts to hedge foreign
currency exposures. Under our program, gains and losses in our
foreign currency exposures are offset by losses and gains on our
forward contracts. Our forward contracts generally have terms of
one to six months. At the end of the reporting period, open
contracts are marked-to-market with unrealized gains and losses
included in Other income, net.
The following table presents a sensitivity analysis on our
foreign forward exchange contract portfolio using a statistical
model to estimate the potential gain or loss in fair value that
could arise from hypothetical appreciation or depreciation of
foreign currency (in millions):
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In June 2006, we issued $1.1 billion principal amount of
0.75% Convertible Senior Notes due 2011 and
$1.0 billion of 1.00% Convertible Senior Notes due
2013. Holders may convert their Senior Notes prior to maturity
upon the occurrence of certain circumstances. Upon conversion,
we would pay the holder the cash value of the applicable number
of shares of Symantec common stock, up to the principal amount
of the note. Amounts in excess of the principal amount, if any,
may be paid in cash or in stock at our option. Concurrent with
the issuance of the Senior Notes, we entered into convertible
note hedge transactions and separately, warrant transactions, to
reduce the potential dilution from the conversion of the Senior
Notes and to mitigate any negative effect such conversion may
have on the price of our common stock.
For business and strategic purposes, we also hold equity
interests in several privately held companies, many of which can
be considered to be in the
start-up or
development stages. These investments are inherently risky and
we could lose a substantial part or our entire investment in
these companies. These investments are recorded at cost and
classified as Other long-term assets in the Consolidated Balance
Sheets. As of April 3, 2009, these investments had an
aggregate carrying value of $3 million.
The consolidated financial statements and related disclosures
included in Part IV, Item 15 of this annual report are
incorporated by reference into this Item 8.
Selected
Quarterly Financial Data
None.
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The SEC defines the term “disclosure controls and
procedures” to mean a company’s controls and other
procedures that are designed to ensure that information required
to be disclosed in the reports that it files or submits under
the Exchange Act is recorded, processed, summarized, and
reported, within the time periods specified in the SEC’s
rules and forms. “Disclosure controls and procedures”
include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in
the reports that it files or submits under the Exchange Act is
accumulated and communicated to the issuer’s management,
including its principal executive and principal financial
officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure. Our Chief Executive Officer and our Chief Financial
Officer have concluded, based on an evaluation of the
effectiveness of our disclosure controls and procedures (as
defined in
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) by our management, with the participation of
our Chief Executive Officer and our Chief Financial Officer,
that our disclosure controls and procedures were effective as of
the end of the period covered by this report.
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined
in
Rules 13a-15(f)
and
15d-15(f) of
the Exchange Act) for Symantec. Our management, with the
participation of our Chief Executive Officer and our Chief
Financial Officer, has conducted an evaluation of the
effectiveness of our internal control over financial reporting
as of April 3, 2009, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). We have excluded from our evaluation, the
internal control over financial reporting of (a) PC Tools
Pty. Ltd. and subsidiaries, which we acquired on October 6,
2008, and is included in the fiscal 2009 consolidated financial
statements of Symantec and constituted $310.5 million of
total assets (of which $273.0 million represents goodwill
and intangible assets included within the scope of the
assessment), as of April 3, 2009, and $13.9 million of
revenue, for the year then ended and (b) MessageLabs Group
Limited and subsidiaries, which we acquired on November 14,
2008, and is included in the fiscal year 2009 consolidated
financial statements of Symantec and constituted
$715.1 million of total assets (of which
$640.1 million represents goodwill and intangible assets
included within the scope of the assessment), as of
April 3, 2009 and $37.8 million of revenues, for the
year then ended.
Our management has concluded that, as of April 3, 2009, our
internal control over financial reporting was effective based on
these criteria.
The Company’s independent registered public accounting firm
has issued an attestation report regarding its assessment of the
Company’s internal control over financial reporting as of
April 3, 2009, which is included in Part IV,
Item 15 of this annual report.
There were no changes in our internal control over financial
reporting during the quarter ended April 3, 2009 that have
materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Our management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our disclosure controls
and procedures or our internal controls will prevent all errors
and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within our Company have
been detected.
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None
The information required by this item is incorporated by
reference to Symantec’s Proxy Statement for its 2009 Annual
Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended
April 3, 2009.
The information required by this item is incorporated by
reference to Symantec’s Proxy Statement for its 2009 Annual
Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended
April 3, 2009.
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