e10vk
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended
March 28, 2008
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the Transition Period
from to .
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Commission File Number
000-17781
SYMANTEC CORPORATION
(Exact name of the registrant as
specified in its charter)
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Delaware
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77-0181864
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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20330 Stevens Creek Blvd.,
Cupertino, California
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95014-2132
(zip code)
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(Address of principal executive
offices)
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Registrants telephone number, including area code:
(408) 517-8000
Securities registered pursuant to Section 12(b) of the
Act:
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Common Stock, par value $0.01 per share,
and Related Preferred Stock Purchase Rights
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The Nasdaq Stock Market LLC
(Name of each exchange on
which registered)
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(Title of each
class)
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Securities registered pursuant to Section 12(g) of the
Act:
None
(Title of class)
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 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 registrants 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. þ
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):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(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 September 28, 2007 as
reported on the Nasdaq Global Select Market: $16,723,116,226.
Number of shares outstanding of the registrants common
stock as of April 25, 2008: 840,122,348
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to
stockholders in connection with our Annual Meeting of
Stockholders for 2008 are incorporated by reference into
Part III herein.
SYMANTEC
CORPORATION
FORM 10-K
For the Fiscal Year Ended March 28, 2008
TABLE OF
CONTENTS
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.
2
FORWARD-LOOKING
STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
The discussion below contains forward-looking statements, which
are subject to safe harbors under the Securities Act of 1933, as
amended, or the Securities Act, and the Securities Exchange Act
of 1934, as amended, or 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, beginning on page 13. We
encourage you to read that section carefully.
3
PART I
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 deliver a comprehensive and diverse set of security and
availability products and services to large enterprises,
governments, small and medium-sized businesses, and consumers on
a worldwide basis. Our delivery network includes direct, inside,
and channel sales resources that support our ecosystem of more
than 44,000 partners worldwide, as well as various relationships
with original equipment manufacturers, or OEMs, Internet service
providers, or ISPs, and retail and online stores. We operate in
three geographic regions: Americas, which includes United
States, Canada, and Latin America; EMEA, which includes Europe,
Middle East and Africa; and Asia Pacific Japan (APJ).
We operate primarily in two growing, diversified markets within
the software sector: the security market and the storage
software market. The security market includes products that
protect consumers and enterprises from threats to endpoint
devices, computer networks, and electronic information. Over the
past several years, we have seen security threats continue to
evolve from traditional viruses, worms, Trojan horses, and other
vulnerabilities, and more recently from threats such as phishing
(attacks that use spoofed websites and emails designed to record
keystrokes or to deceive recipients into divulging personal
financial data), email fraud, and identity theft. We have also
seen security rise to a top priority for enterprises as
information security is increasingly linked to regulatory
compliance. This evolution is a key driver of our research and
development and acquisition strategies, as we strive to
differentiate our solutions from the competition and address our
customers changing needs.
The storage software market includes products that manage,
archive, protect, and recover business-critical data. We believe
that the security and storage 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. The worldwide storage software market consists of
storage management, server and application management, backup
and archiving, and infrastructure software products and
services. Key drivers of demand in this market include the
ever-increasing quantity of data being collected, the need for
data to be protected, recoverable, and accessible at all times,
and the need for a growing number of critical applications to be
continuously available and highly performing.
Other factors driving demand in these markets include the
increase in the number of Internet users, computing devices, and
companies conducting business online, the continuous automation
of business processes, the on-going desire of organizations to
manage their overall IT risk, the increasing pressure on
companies to lower storage and server management costs while
simultaneously increasing the utilization, availability levels,
and performance of their existing IT infrastructure, and the
increasing importance of document retention and regulatory
compliance solutions.
In the ever-changing threat landscape and increasingly complex
IT environment for consumers and enterprises alike, we believe
product differentiation will be the key to sustaining market
leadership. Thus, we continually work to enhance the features
and functionality of our existing products, extend our product
leadership, and create innovative solutions for our customers.
We focus on generating profitable and sustainable growth through
internal research and development, licensing from third parties,
and acquisitions of companies with leading technologies.
Business
Developments and Highlights
During fiscal 2008, we took the following actions to support our
business:
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We developed and launched several new products and integrated
new feature functionality into new versions of products across
our offerings. As a result, customers are leveraging our broader
product portfolio to help them secure and manage their critical
asset information. Some of the new offerings in our
enterprise
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business include: an integrated single agent to manage endpoint
protection that incorporates compliance functionality; a single
solution for centralized, end-to-end management of backup
environments as well as adding data de-duplication and
continuous disk-based backup capability; data protection for
archiving that includes a simple, easy-to-manage online storage
option via our software-as-a-service platform; a standardized
storage management solution for heterogeneous environments that
simplifies data center infrastructure; an integrated data loss
prevention solution that combines endpoint and network-back
technology to prevent the loss of confidential data wherever it
is used or stored; and, the integration of endpoint security and
Windows-based backup, which includes process workflow and
automation functionality, based on the Altiris web
services-based architecture. In our consumer business, we
delivered stronger protection against web-based attacks as well
as password and identity management tools.
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We formed a joint venture with Huawei, Technologies Co., Ltd to
develop and manufacture security and storage appliances for
global telecommunications carriers and enterprise customers. See
Note 5 of the Notes to Consolidated Financial Statements in
this annual report for more information.
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We completed three acquisitions during fiscal 2008, Altiris,
Inc., Vontu, Inc., and Transparent Logic Technologies, Inc. In
addition, during fiscal 2009, we acquired AppStream, Inc. These
acquisitions add new products as well as enhance our product
portfolio with additional features and capabilities. See
Note 4 and 20 of the Notes to Consolidated Financial
Statements in this annual report for more information.
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We sold the Application Performance Management (APM) business
because we determined that APM was not a focus area that aligned
with our long-term strategic direction. See Note 6 of the
Notes to Consolidated Financial Statements in this annual report
for more information.
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We reduced our cost structure in order to better align expenses
with revenue expectations.
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We made the following key additions and changes to our executive
management team:
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We announced the appointment of Enrique Salem as Chief Operating
Officer responsible for product development, sales, services,
marketing and IT. Mr. Salem will be focusing on improving
operations by leveraging our broad portfolio of technology and
services across the businesses, while ensuring the sales and
services teams are executing on our product initiatives.
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We realigned the enterprise product groups to improve cross
product line collaboration and drive better operating results.
The enterprise product line leaders of the Security and
Compliance group and Storage and Server Management group report
directly to Mr. Salem.
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Greg Hughes was named Chief Strategy Officer responsible for
strategy and corporate development. Mr. Hughes will be
focusing on emerging growth areas, such as our Symantec
Protection Network, our software-as-a-service (SaaS) platform,
as well as identifying and investing in new business models and
go-to-market strategies.
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We repurchased 81 million shares of our common stock for an
aggregate amount of $1.5 billion.
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Founded in 1982, Symantec has grown to approximately
$5.9 billion in revenue in fiscal 2008, positioning
Symantec as the fourth largest independent software company in
the world based on revenue. We have 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.
For information regarding our revenue by segment, revenue by
geographical area, and long-lived assets by geographical area,
see Note 19 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
product categories and our financial information, including
information about geographic areas in which we operate, see
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations and
Note 19 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.
5
Operating
Segments and Products
Our operating segments are significant strategic business units
that offer different products and services, distinguished by
customer needs. During most of fiscal 2008, we had six operating
segments: Consumer Products, Security and Data Management, Data
Center Management, Services, Altiris, and Other. The Other
segment is comprised of sunset products and products nearing the
end of their life cycle and also includes general and
administrative expenses; amortization of acquired product
rights, other intangible assets, and other assets; charges, such
as acquired in-process research and development, patent
settlements, stock-based compensation, and restructuring; and
certain indirect costs that are not charged to the other
operating segments.
During the March 2008 quarter, we modified our segment reporting
structure in line with business operational changes associated
with Enrique Salems promotion to Chief Operating Officer
in January 2008. The following changes have been made to our
segment reporting structure:
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The Security and Data Management segment was renamed the
Security and Compliance segment.
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The Altiris segment, in its entirety, moved into the Security
and Compliance segment.
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The Data Center Management segment was renamed the Storage and
Server Management segment. We also moved the Backup Exec
products to the Storage and Server Management Group from the
Security and Data Management segment.
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There were no changes to net revenues in the Consumer Products,
Services, or Other segments.
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The revised segment structure as noted above has been reflected
in our financial results for all periods presented in this
annual report.
Consumer
Products
Our Consumer Products 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.
Many of Symantecs consumer products include an ongoing
commitment to provide product technology and feature updates
throughout the typical
12-month
term of the subscription, to help ensure up-to-the-minute
protection against the latest threats. Most of the products that
we are currently marketing or developing feature
LiveUpdatetm
functionality, which automatically updates these products with
the latest technology, malware protection, antispyware
definitions, antiphishing and antispam blacklists, parental
control databases, and many other types of security and
application data.
During fiscal 2008, the growth in our consumer business was
driven by the evolving threat landscape, including malicious
threats and crimeware, and increased demand for products that
secure sensitive online consumer interactions, such as financial
transactions, online backup and identity management. Our primary
consumer products are: Norton
360tm,
Norton Internet
Securitytm,
and Norton AntiVirus.
Security
and Compliance
Our Security and Compliance segment focuses on helping our
customers standardize, automate and drive down the costs of
day-to-day security activities.
Our primary security and compliance solutions address the
following areas:
Endpoint
Security and Management
Our endpoint security and management offerings enable
organizations to evaluate, protect, and remediate both managed
and unmanaged systems as they connect to corporate assets.
Integrated solutions help customers protect critical network
endpoints such as desktops, servers, laptops, and mobile devices
against known and unknown threats using technologies such as
antivirus, antispyware, firewall, intrusion prevention, network
access control, advanced management, and monitoring.
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Endpoint management solutions help customers further secure and
ultimately reduce the cost of owning information technology by
automating management tasks, including backup, recovery,
deployment, migration, inventory, patch management, IT asset and
service management, business process automation, data archiving
and remote control. Products include
Symantectm
Endpoint Protection, Symantec Network Access Control, and
Altiristm
Total Management Suite.
Information
Risk Management
Our Information Risk Management solutions provide a common
framework for customers to consistently enforce data security
policies across endpoints, networks, email, storage systems, and
archiving. These solutions are built on market-leading policy
management, archiving and retention, data loss prevention,
antispam, and content filtering technologies, allowing IT
professionals to proactively mitigate data security risks and
policy violations while rapidly and cost-effectively responding
to
e-Discovery
requests. We also help customers define, control, and govern
their IT policies from a central location, enabling them to
protect critical assets and reduce business risk by probing for
network vulnerabilities, monitoring threats in real-time,
retaining logs for analysis, managing security incidents, and
demonstrating compliance with internal mandates and external
regulations. Products include Symantec Information
Foundationtm,
Symantec Mail Security, Symantec Enterprise
Vaulttm,
Vontutm
Data Loss Prevention, Symantec Control Compliance Suite,
Symantec Security Information Manager, and Symantec Enterprise
Security
Managertm.
Storage
and Server Management
Our Storage and Server Management segment focuses on providing
enterprise customers with storage management, high availability,
and data protection 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:
Storage
and Availability Management
These solutions provide file systems, volume management,
clustering, storage resource management, storage utilization
management, Storage Area Network management, storage
virtualization and replication. They also enable enterprises to
manage large storage environments and ensure the availability of
critical applications. Products include Veritas CommandCentral
Storage, Veritas Storage
Foundationtm,
and
Veritastm
Cluster Server.
Data
Protection
Symantecs data protection family of products are designed
to ensure successful backup and recovery of information and
systems for organizations ranging from small to large
enterprises using the latest disk, tape, de-duplication,
indexing and virtual technologies. Products include Veritas
NetBackuptm,
Veritas NetBackup
PureDisktm,
Symantec Backup
Exectm,
and Symantec Backup Exec System Recovery.
Services
Our Services segment delivers Consulting, Managed, Hosted and
Education services that complement our products and assist with
product sales.
Managed
and Hosted Services
Symantec Managed Services 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. Symantec Hosted
Services leverage infrastructure managed in a Symantec
environment to help customers reduce IT complexity, manage IT
risk, and to lower cost of operations. Symantec recently
launched the Symantec Protection Network, a
software-as-a-service platform that brings a range of
availability technologies to small to medium-sized
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businesses. Currently two offerings are in the market
Symantec Online Backup and Symantec Online Storage
for Backup Exec.
Consulting
and Education Services
Symantec Consulting provides product enablement and residency
services to enable customers to maximize the value of their
investment in Symantecs products and solutions. In
addition, Symantec Consulting provides customers advisory
services in the areas of security and availability. Education
Services provides a full range of programs, including technical
training and security awareness training, to help customers
optimize their Symantec solutions.
Sales and
Channel Strategy
Consumer
Products
We sell our consumer products and services to individuals and
home offices globally through a multi-tiered network of
distribution partners. Our strategy is to place our products in
a variety of channels where consumers might consider purchasing
security, PC tuneup and backup products.
Our products are available to customers through channels that
include distributors, retailers, direct marketers,
Internet-based resellers, OEMs, system builders, educational
institutions, and ISPs. We separately sell annual content update
subscriptions directly to end-users primarily through the
Internet. We also sell some of our products and product upgrades
in conjunction with channel partners through direct mail/email
and over the Internet.
Sales in the Consumer Products business through our electronic
distribution channel, which includes sales derived from OEMs,
subscriptions, upgrades, online sales, and renewals, grew by
$174 million in fiscal 2008 over fiscal 2007. During fiscal
2008, approximately 73 percent of revenue in the Consumer
Products segment came from our electronic channels.
Enterprise
Solutions
We sell and market our products and related services to
enterprise customers both directly and through a variety of
indirect sales channels, which include value-added resellers, or
VARs, large account resellers, or LARs, distributors, system
integrators, or SIs, and OEMs. Our enterprise customers include
many leading global corporations, small and medium-sized
businesses, and many government agencies around the world. Some
of our sales efforts are targeted to senior executives and IT
department personnel who are responsible for managing a
companys IT initiatives.
Our primary method of demand generation for enterprise customers
is through our direct sales force. We ended fiscal 2008 with
approximately 9,200 individuals in our sales and services team.
Account managers are responsible for customer relationships and
opportunity management and are supported by product and services
specialists.
We complement our direct sales efforts with indirect sales
channels such as resellers, VARs, LARs, distributors, and SIs,
primarily to address the small to medium-sized enterprise
market. We sell our products through authorized distributors in
more than 40 countries throughout the world. Our top distributor
during fiscal 2008 was Ingram Micro, Inc.
Another important element of our Enterprise Solutions strategy
involves our relationships with OEM partners that incorporate
our products into their products, bundle our products with their
products, or serve as authorized resellers of our products.
Marketing
and Advertising
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.
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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.
Support
Symantec has centralized support facilities throughout the world
that provide rapid, around-the-clock responses to a wide range
of customer inquiries. We have support facilities with experts
in technical areas associated with the products we produce and
the operating environments in which these products are deployed
by many of our customers. Our technical support experts provide
customers with information on product implementation and usage,
issue resolution, and countermeasures and identification tools
for new threats. Support is available in multiple languages
including Cantonese, Dutch, English, French, German, Italian,
Japanese, Korean, Mandarin, Portuguese, and Spanish. We believe
that enhanced language support is an important element of our
success and plan to continue our investments in the delivery of
non-English technical support.
Symantec provides customers various levels of enterprise support
offerings depending on their needs. Business Critical Services,
our highest level of protection provides personalized, proactive
support from technical experts for enterprises that require
secure, uninterrupted access to their data and applications. Our
enterprise security support program offers annual maintenance
support contracts to enterprise customers worldwide, including
content, upgrades, and technical support. Our standard technical
support includes the following: unlimited hotline service
delivered by telephone, fax, email, and over the Internet;
immediate patches for severe problems; and, 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, and email support to consumers worldwide.
A team of product experts, editors, and language translators are
dedicated to maintaining the robustness of the online knowledge
base. Generally, we use an outside vendor to provide telephone
product support for a fee. Customers that subscribe to
LiveUpdate receive automatic downloads of the latest virus
definitions, application bug fixes, and patches for most of our
consumer products.
Customers
Our solutions are used worldwide by individual and enterprise
customers in a wide variety of industries, small, medium and
large enterprises, as well as various governmental entities. In
fiscal 2008, 2007 and 2006, one distributor, Ingram Micro,
accounted for 10%, 11% and 13%, 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 was
individually responsible for over 10 percent of our total
net revenues in each of the last three fiscal years. In fiscal
2008, 2007 and 2006, one reseller, Digital River, accounted for
11%, 12% and 11%, respectively, of our total net revenues.
Research
and Development
Research and development expenses, exclusive of in-process
research and development associated with acquisitions, were
$895 million, $867 million, and $682 million in
fiscal 2008, 2007, and 2006, respectively. We believe that
technical leadership is essential to our success and we expect
to continue to commit substantial resources to research and
development.
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Symantec embraces a global R&D strategy with teams of
engineers worldwide focused on product development, pure
research and on tailoring our products to meet regional
requirements. Conducting R&D close to our customers ensures
that we have intimate knowledge of the markets we serve and a
better link between our customers and our labs. Symantec strives
to maintain long-term technological leadership by nurturing
innovation, generating new ideas and developing next-generation
technologies across all of our business.
Symantec Research Labs is a group designed to foster new
technologies and products to help us maintain leadership in
existing markets. The team 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
Symantecs needs.
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 our Symantec Global Intelligence Network,
which provides insight into emerging trends in attacks,
malicious code activity, phishing, spam, and other threats. The
Security Response team is also focused on developing new
technologies and approaches to protecting customers
information and systems.
Independent contractors are used for various aspects of the
product development process. In addition, elements of some of
our products are licensed from third parties.
Acquisitions
Our strategic technology acquisitions are designed to enhance
the features and functionality of our existing products, as well
as extend our product leadership. We use strategic acquisitions
to provide certain technology, people, and products for our
overall product and services strategy. We consider both time to
market and potential market share gains when evaluating
acquisitions of technologies, product lines, or companies. We
have completed a number of acquisitions of technologies,
companies, and products in the past, and we have also disposed
of technologies and products. We may acquire
and/or
dispose of other technologies, products and companies in the
future.
During fiscal 2008, we completed the following acquisitions:
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Company Name
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Company Description
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Date Acquired
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Altiris Inc.
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A provider of information technology management software that
enables businesses to easily manage and service network-based
endpoints.
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April 6, 2007
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Vontu, Inc.
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A provider of Data Loss Prevention (DLP) solutions that assist
organizations in preventing the loss of confidential or
proprietary information.
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November 30, 2007
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Transparent Logic Technologies, Inc.
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A provider of products that support business process automation
and workflow.
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January 11, 2008
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In addition, on April 18, 2008, we acquired AppStream Inc.,
a provider of application streaming technology, an on-demand
delivery mechanism that leverages the power of application
virtualization to enable greater flexibility and control.
For further discussion of our acquisitions, see Notes 4 and
20 of the Notes to Consolidated Financial Statements in this
annual report.
Competition
Our markets are consolidating, are highly competitive, and are
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.
10
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.
Consumer
Products
Some of the channels in which our consumer products are offered
are highly competitive. Our competitors are sometimes 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 Products segment are
McAfee, Inc., Microsoft Corporation, and Trend Micro Inc. There
are also several smaller regional security companies that we
compete against primarily in the EMEA and APJ regions.
Security
and Compliance
In the security and compliance markets, we compete against many
companies that offer competing products to our technology
solutions and competing services to our response and support
services. Our primary competitors in the security market are
Cisco Systems, 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.
Storage
and Server Management
The markets for storage and server management are intensely
competitive. In the areas of data protection and storage and
server management, our primary competitors are CA Inc.,
CommVault Systems, Inc., EMC, Inc., Hewlett-Packard Co., IBM
Corp., Microsoft, Oracle Corp., and Sun Microsystems, Inc.
Services
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, Hewlett-Packard, IBM, and regional
specialized consulting firms. In the managed security services
business, our primary competitors are IBM and VeriSign, Inc.
Intellectual
Property
Protective
Measures
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.
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Trademarks,
Patents, Copyrights, and Licenses
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.
Seasonality
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.
Employees
As of March 28, 2008, we employed more than
17,600 people worldwide, approximately 53 percent of
whom reside in the U.S. Approximately 6,200 employees
work in sales and marketing; 5,200 in research and development;
3,900 in support and services; and 2,300 in management,
manufacturing, and administration.
Other
Information
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, or 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 SECs 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
12
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.
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:
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Managing the length of the development cycle for new products
and product enhancements, which has frequently been longer than
we originally expected
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Adapting to emerging and evolving industry standards and to
technological developments by our competitors and customers
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Extending the operation of our products and services to new
platforms and operating systems
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Entering into new or unproven markets with which we have limited
experience
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Managing new product and service strategies, including
integrating our various security and storage technologies,
management solutions, customer service, and support into unified
enterprise security and storage solutions
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Incorporating acquired products and technologies
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Trade compliance issues affecting our ability to ship new
products
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Developing or expanding efficient sales channels
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Obtaining sufficient licenses to technology and technical access
from operating system software vendors on reasonable terms to
enable the development and deployment of interoperable products,
including source code licenses for certain products with deep
technical integration into operating systems
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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.
Fluctuations
in demand for our products and services are driven by many
factors, and a decrease in demand for our products could
adversely affect our financial results.
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
13
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, our revenues and gross margin could be adversely
affected. For example, if the challenging economic conditions in
the United States or other key markets continue or deteriorate
further, we may experience slower or negative revenue growth and
our business and operating results might suffer.
We
operate in a highly competitive environment, and our competitors
may gain market share in the markets for our products that could
adversely affect our business and cause our revenues to
decline.
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 software-as-a-service
(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
recently released our own SaaS offerings. However, it is
uncertain whether our SaaS strategy will prove successful or
whether we will be able to successfully incorporate our SaaS
offering 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.
14
If we
fail to manage our sales and distribution channels effectively
or if our partners choose not to market and sell our products to
their customers, our operating results could be adversely
affected.
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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Longer sales cycles associated with direct sales efforts
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Difficulty in hiring, retaining, and motivating our direct sales
force
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Substantial amounts of training for sales representatives to
become productive, including regular updates to cover new and
revised products
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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:
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Our lack of control over the timing of delivery of our products
to end-users
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Our resellers and distributors are not subject to minimum sales
requirements or any obligation to market our products to their
customers
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Our reseller and distributor agreements are generally
nonexclusive and may be terminated at any time without cause
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Our resellers and distributors frequently market and distribute
competing products and may, from time to time, place greater
emphasis on the sale of these products due to pricing,
promotions, and other terms offered by our competitors
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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:
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Our lack of control over the shipping dates or volume of systems
shipped
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Our OEM partners are generally not subject to minimum sales
requirements or any obligation to market our products to their
customers
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Our OEM partners may terminate or renegotiate their arrangements
with us and new terms may be less favorable due, among other
things, to an increasingly competitive relationship with certain
partners
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Sales through our OEM partners are subject to changes in
strategic direction, competitive risks, and other issues that
could result in reduction of OEM sales
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The development work that we must generally undertake under our
agreements with our OEM partners may require us to invest
significant resources and incur significant costs with little or
no associated revenues
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The time and expense required for the sales and marketing
organizations of our OEM partners to become familiar with our
products may make it more difficult to introduce those products
to the market
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Our OEM partners may develop, market, and distribute their own
products and market and distribute products of our competitors,
which could reduce our sales
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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, 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
15
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.
We
have grown, and may continue to grow, through acquisitions that
give rise to risks and challenges that could adversely affect
our future financial results.
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:
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Complexity, time, and costs associated with the integration of
acquired business operations, workforce, products, and
technologies into our existing business, sales force, employee
base, product lines, and technology
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Diversion of management time and attention from our existing
business and other business opportunities
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Loss or termination of employees, including costs associated
with the termination or replacement of those employees
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Assumption of debt or other liabilities of the acquired
business, including litigation related to the acquired business
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The addition of acquisition-related debt as well as increased
expenses and working capital requirements
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Dilution of stock ownership of existing stockholders
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Increased costs and efforts in connection with compliance with
Section 404 of the Sarbanes-Oxley Act
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Substantial accounting charges for restructuring and related
expenses, write-off of in-process research and development,
impairment of goodwill, amortization of intangible assets, and
stock-based compensation expense
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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
undergo 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.
We
have not historically maintained substantial levels of
indebtedness, and our financial condition and results of
operations could be adversely affected if we do not effectively
manage our liabilities.
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 and we borrowed $200 million under the
facility in November 2007 to fund a portion of the purchase
price of our acquisition of Vontu, Inc. Our credit facility
allows us immediate access to an additional $800 million of
domestic funds if we identify opportunities for its use. 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.
16
Our
international operations involve risks that could increase our
expenses, adversely affect our operating results, and require
increased time and attention of our management.
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:
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Potential loss of proprietary information due to
misappropriation or laws that may be less protective of our
intellectual property rights than U.S. laws
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Requirements of foreign laws and other governmental controls,
including trade and labor restrictions and related laws that
reduce the flexibility of our business operations
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Regulations or restrictions on the use, import, or export of
encryption technologies that could delay or prevent the
acceptance and use of encryption products and public networks
for secure communications
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Central bank and other restrictions on our ability to repatriate
cash from our international subsidiaries or to exchange cash in
international subsidiaries into cash available for use in the
U.S.
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Fluctuations in currency exchange rates and economic instability
such as higher interest rates in the U.S. and inflation
that could reduce our customers ability to obtain
financing for software products or that could make our products
more expensive or could increase our costs of doing business in
certain countries
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Limitations on future growth or inability to maintain current
levels of revenues from international sales if we do not invest
sufficiently in our international operations
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Longer payment cycles for sales in foreign countries and
difficulties in collecting accounts receivable
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Difficulties in staffing, managing, and operating our
international operations, including difficulties related to
administering our stock plans in some foreign countries
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Difficulties in coordinating the activities of our
geographically dispersed and culturally diverse operations
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Seasonal reductions in business activity in the summer months in
Europe and in other periods in other countries
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Reduced sales due to the failure to obtain any required export
approval of our technologies, particularly our encryption
technologies
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Costs and delays associated with developing software in multiple
languages
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Political unrest, war, or terrorism, particularly in areas in
which we have facilities
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A significant portion of our transactions outside of the
U.S. are denominated in foreign currencies. Accordingly,
our future operating results will continue to be subject to
fluctuations in foreign currency rates. We may be negatively
affected by fluctuations in foreign currency rates in the
future, especially if international sales continue to grow as a
percentage of our total sales.
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.
Our
products are complex and operate in a wide variety of computer
configurations, which could result in errors or product
failures.
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, 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 customers 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 recent changes in 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.
Key personnel have left our company in the past and there likely
will be additional departures of key personnel from time to time
in the future. 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 are
a party to several class action lawsuits, which could require
significant management time and attention and result in
significant legal expenses, and which could, if not determined
favorably, negatively impact our business, financial condition,
results of operations, and cash flows.
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 managements
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.
18
Third
parties claiming that we infringe their proprietary rights could
cause us to incur significant legal expenses and prevent us from
selling our products.
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.
If we
do not protect our proprietary information and prevent third
parties from making unauthorized use of our products and
technology, our financial results could be harmed.
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.
Some
of our products contain open source software, and
any failure to comply with the terms of one or more of these
open source licenses could negatively affect our
business.
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
19
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.
Our
software products and website may be subject to intentional
disruption that could adversely impact our reputation and future
sales.
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 and future sales harmed if these intentionally
disruptive efforts are successful.
Increased
customer demands on our technical support services may adversely
affect our relationships with our customers and our financial
results.
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.
Accounting
charges may cause fluctuations in our quarterly financial
results.
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:
|
|
|
|
|
Amortization of intangible assets, including acquired product
rights
|
|
|
|
Impairment of goodwill
|
|
|
|
Stock-based compensation expense
|
|
|
|
Restructuring charges
|
|
|
|
Impairment of long-lived assets
|
|
|
|
Loss on sale of a business and similar write-downs of assets
held for sale
|
For example, in connection with our acquisition of Veritas, we
have recorded approximately $2.8 billion of acquired
product rights and other intangible assets and $8.6 billion
of goodwill. We have recorded and will continue to record future
amortization charges with respect to a portion of these
intangible assets and stock-based compensation expense related
to the stock options to purchase Veritas common stock assumed by
us. In addition, we will evaluate our long-lived assets,
including property and equipment, goodwill, acquired product
rights, and other intangible assets, whenever events or
circumstances occur which indicate that these assets might be
impaired. Goodwill is evaluated annually for impairment in the
fourth quarter of each fiscal year or more frequently if events
and circumstances warrant, 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 managements assumptions of our future
revenues, operating costs, and other relevant factors. If
managements estimates of future operating results change,
or if there are changes to other assumptions such as the
discount rate
20
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.
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 may increase, which could increase our income
tax expense and reduce our net income.
Our effective tax rate could be adversely affected by several
factors, many of which are outside of our control, including:
|
|
|
|
|
Changes in the relative proportions of revenues and income
before taxes in the various jurisdictions in which we operate
that have differing statutory tax rates
|
|
|
|
Changing tax laws, regulations, and interpretations in multiple
jurisdictions in which we operate as well as the requirements of
certain tax rulings
|
|
|
|
The tax effects of purchase accounting for acquisitions and
restructuring charges that may cause fluctuations between
reporting periods
|
|
|
|
Tax assessments, or any related tax interest or penalties, could
significantly affect our income tax expense for the period in
which the settlements take place.
|
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 to which we are subject has determined that we owe
a greater amount of tax than we have reported to such authority,
and 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.
Fluctuations
in our quarterly financial results have affected the price of
our common stock in the past and could affect our stock price in
the future.
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:
|
|
|
|
|
Reduced demand for any of our products
|
|
|
|
Entry of new competition into our markets
|
|
|
|
Competitive pricing pressure for one or more of our classes of
products
|
|
|
|
Our ability to timely complete the release of new or enhanced
versions of our products
|
|
|
|
The number, severity, and timing of threat outbreaks (e.g. worms
and viruses)
|
|
|
|
Our resellers making a substantial portion of their purchases
near the end of each quarter
|
21
|
|
|
|
|
Enterprise customers tendency to negotiate site licenses
near the end of each quarter
|
|
|
|
Cancellation, deferral, or limitation of orders by customers
|
|
|
|
Fluctuations in foreign currency exchange rates
|
|
|
|
Movement in interest rates
|
|
|
|
The rate of adoption of new product technologies and new
releases of operating systems
|
|
|
|
Weakness or uncertainty in general economic or industry
conditions in any of the multiple markets in which we operate
that could reduce customer demand and ability to pay for our
products and services
|
|
|
|
Political and military instability, which could slow spending
within our target markets, delay sales cycles, and otherwise
adversely affect our ability to generate revenues and operate
effectively
|
|
|
|
Budgetary constraints of customers, which are influenced by
corporate earnings and government budget cycles and spending
objectives
|
|
|
|
Disruptions in our business operations or target markets caused
by, among other things,
|
|
|
|
|
|
Earthquakes, floods, or other natural disasters affecting our
headquarters located in Silicon Valley, California, an area
known for seismic activity, or our other locations worldwide
|
|
|
|
Acts of war or terrorism
|
|
|
|
Intentional disruptions by third parties
|
|
|
|
Health or similar issues, such as a pandemic
|
Any of the foregoing factors could cause the trading price of
our common stock to fluctuate significantly.
Our
stock price may be volatile in the future, and you could lose
the value of your investment.
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:
|
|
|
|
|
Announcements of quarterly operating results and revenue and
earnings forecasts by us that fail to meet or be consistent with
our earlier projections or the expectations of our investors or
securities analysts
|
|
|
|
Announcements by either our competitors or customers that fail
to meet or be consistent with their earlier projections or the
expectations of our investors or securities analysts
|
|
|
|
Rumors, announcements, or press articles regarding our or our
competitors operations, management, organization,
financial condition, or financial statements
|
|
|
|
Changes in revenue and earnings estimates by us, our investors,
or securities analysts
|
|
|
|
Accounting charges, including charges relating to the impairment
of goodwill
|
|
|
|
Announcements of planned acquisitions or dispositions by us or
by our competitors
|
|
|
|
Announcements of new or planned products by us, our competitors,
or our customers
|
|
|
|
Gain or loss of a significant customer
|
|
|
|
Inquiries by the SEC, NASDAQ, law enforcement, or other
regulatory bodies
|
|
|
|
Acts of terrorism, the threat of war, and other crises or
emergency situations
|
|
|
|
Economic slowdowns or the perception of an oncoming economic
slowdown in any of the major markets in which we operate
|
22
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.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
There are currently no unresolved issues with respect to any
Commission staffs 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 Dublin,
Ireland facility also includes manufacturing operations. Our
corporate headquarters is located in Cupertino, California in a
532,000 square foot facility that we own. We occupy an
additional 796,000 square feet in the San Francisco
Bay Area, of which 592,000 square feet is owned and
204,000 square feet is leased. Our leased facilities are
occupied under leases that expire at various times through 2022.
The following table presents the approximate square footage of
our facilities as of March 28, 2008:
|
|
|
|
|
|
|
|
|
|
|
Approximate Total Square
Footage(1)
|
|
Location
|
|
Owned
|
|
|
Leased
|
|
|
Americas
|
|
|
2,044,000
|
|
|
|
1,616,000
|
|
Europe, Middle East, and Africa
|
|
|
285,000
|
|
|
|
598,000
|
|
Asia Pacific/Japan
|
|
|
5,000
|
|
|
|
1,277,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,334,000
|
|
|
|
3,491,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in the total square footage above are vacant,
available-for-lease properties totaling approximately
266,000 square feet, and certain properties currently
held-for-sale totaling approximately 192,000 square feet.
Total square footage excludes executive suites, and
approximately 234,000 square feet relating to facilities
subleased to third parties. |
We believe that our existing facilities are adequate for our
current needs and that the productive capacity of our facilities
is substantially utilized.
|
|
Item 3.
|
Legal
Proceedings
|
Information with respect to this Item may be found in
Note 18 of the Notes to Consolidated Financial Statements
in this annual report which information is incorporated into
this Item 3 by reference.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of security holders during
the fourth quarter of fiscal 2008.
23
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Market
for Our Common Stock
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
Fiscal 2007
|
|
|
Mar. 28,
|
|
Dec. 28,
|
|
Sep. 28,
|
|
June 29,
|
|
Mar. 30,
|
|
Dec. 29,
|
|
Sep. 29,
|
|
June 30,
|
|
|
2008
|
|
2007
|
|
2007
|
|
2007
|
|
2007
|
|
2006
|
|
2006
|
|
2006
|
|
High
|
|
$
|
18.72
|
|
|
$
|
21.32
|
|
|
$
|
21.03
|
|
|
$
|
20.70
|
|
|
$
|
21.86
|
|
|
$
|
22.19
|
|
|
$
|
21.42
|
|
|
$
|
17.90
|
|
Low
|
|
$
|
14.54
|
|
|
$
|
15.97
|
|
|
$
|
17.23
|
|
|
$
|
16.77
|
|
|
$
|
16.20
|
|
|
$
|
18.59
|
|
|
$
|
14.78
|
|
|
$
|
14.98
|
|
As of March 28, 2008, there were 3,456 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.
Repurchases
of Our Equity Securities
Stock repurchases during the three-month period ended
March 28, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar Value
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
That May Yet be
|
|
|
|
|
|
|
|
|
|
Total Number of Shares
|
|
|
Purchased Under
|
|
|
|
Total Number of
|
|
|
Average Price
|
|
|
Purchased Under Publicly
|
|
|
the Plans
|
|
|
|
Shares Purchased
|
|
|
Paid per Share
|
|
|
Announced Plans or Programs
|
|
|
or Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions )
|
|
|
December 29, 2007 to January 25, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
1,200
|
|
January 26, 2008 to February 22, 2008
|
|
|
10,727,425
|
|
|
|
17.71
|
|
|
|
10,727,425
|
|
|
|
1,010
|
|
February 24, 2008 to March 28, 2008
|
|
|
569,000
|
|
|
|
17.73
|
|
|
|
569,000
|
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,296,425
|
|
|
$
|
17.71
|
|
|
|
11,296,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 14, 2007, we announced that our Board of Directors
authorized the repurchase of $2 billion of Symantec common
stock, without a scheduled expiration date. As of March 28,
2008, $1 billion remained authorized for future
repurchases. For information with regard to our stock repurchase
programs, See Note 12 of the Notes to Consolidated
Financial Statements in this annual report, which information is
incorporated herein by reference.
24
Stock
Performance Graphs
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.
Comparison
of cumulative total return March 31, 2003 to
March 31, 2008
The graph below compares the cumulative total stockholder return
on Symantec common stock from March 31, 2003 to
March 31, 2008 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, 2003, 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.
COMPARISON
OF 5-YEAR CUMULATIVE TOTAL RETURN*
Among Symantec Corporation, The S & P 500 Index
And The S & P Information Technology Index
*$100 invested on 3/31/03 in stock or index
including reinvestment of dividends. Fiscal year ending
March 31.
Copyright
©
2008, Standard & Poors, a division of The
McGraw-Hill Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/03
|
|
|
3/04
|
|
|
3/05
|
|
|
3/06
|
|
|
3/07
|
|
|
3/08
|
Symantec Corporation
|
|
|
|
100.00
|
|
|
|
|
236.35
|
|
|
|
|
217.76
|
|
|
|
|
171.82
|
|
|
|
|
176.62
|
|
|
|
|
169.68
|
|
S & P 500
|
|
|
|
100.00
|
|
|
|
|
135.12
|
|
|
|
|
144.16
|
|
|
|
|
161.07
|
|
|
|
|
180.13
|
|
|
|
|
170.98
|
|
S & P Information Technology
|
|
|
|
100.00
|
|
|
|
|
144.06
|
|
|
|
|
140.47
|
|
|
|
|
159.47
|
|
|
|
|
164.42
|
|
|
|
|
163.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Comparison
of cumulative total return June 23, 1989(1) to
March 31, 2008
The graph below compares the cumulative total stockholder return
on Symantec common stock from June 23, 1989 (the date of
Symantecs initial public offering) to March 31, 2008
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
Symantecs 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.
COMPARISON
OF 19-YEAR CUMULATIVE TOTAL RETURN*
Among Symantec Corporation, The S & P 500 Index
And The S & P Information Technology Index
*$100 invested on 6/23/89 in stock or 5/31/89 in
index including reinvestment of dividends. Fiscal
year ending March 31.
Copyright
©
2008, Standard & Poors, a division of The
McGraw-Hill Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/89
|
|
|
3/90
|
|
|
3/91
|
|
|
3/92
|
|
|
3/93
|
|
|
3/94
|
|
|
3/95
|
|
|
3/96
|
|
|
3/97
|
|
|
3/98
|
Symantec Corporation
|
|
|
|
100.00
|
|
|
|
|
173.91
|
|
|
|
|
419.57
|
|
|
|
|
743.48
|
|
|
|
|
223.91
|
|
|
|
|
271.74
|
|
|
|
|
400.00
|
|
|
|
|
223.91
|
|
|
|
|
247.83
|
|
|
|
|
468.48
|
|
S & P 500
|
|
|
|
100.00
|
|
|
|
|
108.97
|
|
|
|
|
124.68
|
|
|
|
|
138.45
|
|
|
|
|
159.53
|
|
|
|
|
161.88
|
|
|
|
|
187.08
|
|
|
|
|
247.13
|
|
|
|
|
296.13
|
|
|
|
|
438.26
|
|
S & P Information Technology
|
|
|
|
100.00
|
|
|
|
|
101.30
|
|
|
|
|
119.45
|
|
|
|
|
134.38
|
|
|
|
|
153.32
|
|
|
|
|
178.89
|
|
|
|
|
241.48
|
|
|
|
|
321.24
|
|
|
|
|
448.04
|
|
|
|
|
684.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/99
|
|
|
3/00
|
|
|
3/01
|
|
|
3/02
|
|
|
3/03
|
|
|
3/04
|
|
|
3/05
|
|
|
3/06
|
|
|
3/07
|
|
|
3/08
|
Symantec Corporation
|
|
|
|
294.57
|
|
|
|
|
1306.52
|
|
|
|
|
727.17
|
|
|
|
|
1433.39
|
|
|
|
|
1362.78
|
|
|
|
|
3220.87
|
|
|
|
|
2967.65
|
|
|
|
|
2341.57
|
|
|
|
|
2406.96
|
|
|
|
|
2312.35
|
|
S & P 500
|
|
|
|
519.16
|
|
|
|
|
612.32
|
|
|
|
|
479.59
|
|
|
|
|
480.75
|
|
|
|
|
361.71
|
|
|
|
|
488.74
|
|
|
|
|
521.45
|
|
|
|
|
582.60
|
|
|
|
|
651.53
|
|
|
|
|
618.45
|
|
S & P Information Technology
|
|
|
|
1144.59
|
|
|
|
|
2284.82
|
|
|
|
|
985.78
|
|
|
|
|
965.52
|
|
|
|
|
672.12
|
|
|
|
|
957.96
|
|
|
|
|
940.82
|
|
|
|
|
1092.85
|
|
|
|
|
1139.97
|
|
|
|
|
1139.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Symantecs initial public offering was on June 23,
1989. Data is shown beginning June 30, 1989 because data
for cumulative returns on the S&P 500 and the S&P
Information Technology indices are available only at month end. |
26
|
|
Item 6.
|
Selected
Financial Data
|
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, Managements
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:
|
|
|
|
|
Altiris Inc., Vontu Inc., and Transparent Logic Technologies,
Inc. during fiscal 2008
|
|
|
|
Company-i Limited and 4FrontSecurity, Inc. during fiscal 2007
|
|
|
|
Veritas Software Corporation, XtreamLok Pty. Ltd.,
WholeSecurity, Inc., Sygate Technologies, Inc., BindView
Development Corporation, IMlogic, Inc., and Relicore, Inc.
during fiscal 2006
|
|
|
|
Brightmail, Inc., TurnTide, Inc., @stake, Inc., LIRIC Associates
Ltd, and Platform Logic, Inc. during fiscal 2005
|
|
|
|
Nexland, Inc., PowerQuest, Inc., Safeweb, Inc., and ON
Technology Corp. during fiscal 2004
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal(c)
|
|
|
|
2008
|
|
|
2007(a)
|
|
|
2006(b)
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except net income per share)
|
|
|
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
5,874,419
|
|
|
$
|
5,199,366
|
|
|
$
|
4,143,392
|
|
|
$
|
2,582,849
|
|
|
$
|
1,870,129
|
|
Acquired in-process research and
development(d)
|
|
|
|
|
|
|
|
|
|
|
285,100
|
|
|
|
3,480
|
|
|
|
3,710
|
|
Restructuring
|
|
|
73,914
|
|
|
|
70,236
|
|
|
|
24,918
|
|
|
|
2,776
|
|
|
|
907
|
|
Integration
|
|
|
|
|
|
|
744
|
|
|
|
15,926
|
|
|
|
3,494
|
|
|
|
|
|
Loss on sale of a
business(e)
|
|
|
94,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
602,280
|
|
|
|
519,742
|
|
|
|
273,965
|
|
|
|
819,266
|
|
|
|
513,585
|
|
Net income
|
|
$
|
463,850
|
|
|
$
|
404,380
|
|
|
$
|
156,852
|
|
|
$
|
536,159
|
|
|
$
|
370,619
|
|
Earnings per share
basic(f)
|
|
$
|
0.53
|
|
|
$
|
0.42
|
|
|
$
|
0.16
|
|
|
$
|
0.81
|
|
|
$
|
0.61
|
|
Earnings per share
diluted(f)
|
|
$
|
0.52
|
|
|
$
|
0.41
|
|
|
$
|
0.15
|
|
|
$
|
0.74
|
|
|
$
|
0.54
|
|
Shares used to compute earnings per share
basic(f)
|
|
|
867,562
|
|
|
|
960,575
|
|
|
|
998,733
|
|
|
|
660,631
|
|
|
|
611,970
|
|
Shares used to compute earnings per share
diluted(f)
|
|
|
884,136
|
|
|
|
983,261
|
|
|
|
1,025,856
|
|
|
|
738,245
|
|
|
|
719,110
|
|
|
|
|
(a) |
|
In fiscal 2007, we adopted SFAS No. 123R, which
resulted in stock-based compensation charges of
$154 million. |
|
(b) |
|
We acquired Veritas on July 2, 2005 and its results of
operations are included from the date of acquisition. |
|
(c) |
|
We have a 52/53-week fiscal year. Fiscal 2008, 2007, 2006, and
2005 were each comprised of 52 weeks of operations. Fiscal
2004 was comprised of 53 weeks of operations. |
|
(d) |
|
In fiscal 2006, we wrote off $284 million and
$1 million of acquired in-process research and development
in connection with our acquisitions of Veritas and BindView
Development Corporation, respectively. |
27
|
|
|
(e) |
|
In fiscal 2008, we recorded a write-down of $95 million of
certain tangible and intangible assets and liabilities in the
Storage and Server Management segment. On March 8, 2008
these assets were sold to a third party. |
|
(f) |
|
Share and per share amounts reflect the two-for-one stock splits
effected as stock dividends, which occurred on November 30,
2004, and November 19, 2003. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
March 28, 2008
|
|
March 30, 2007
|
|
March 31, 2006
|
|
April 1, 2005
|
|
April 2, 2004
|
|
|
(In thousands)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital(g)
|
|
$
|
(69,668
|
)
|
|
$
|
752,958
|
|
|
$
|
430,365
|
|
|
$
|
1,987,259
|
|
|
$
|
1,555,094
|
|
Total assets
|
|
|
18,092,094
|
|
|
|
17,750,870
|
|
|
|
17,913,183
|
|
|
|
5,614,221
|
|
|
|
4,456,498
|
|
Convertible subordinated
notes(h)
|
|
|
|
|
|
|
|
|
|
|
512,800
|
|
|
|
|
|
|
|
599,987
|
|
Convertible senior
notes(i)
|
|
|
2,100,000
|
|
|
|
2,100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
obligations(j)
|
|
|
106,187
|
|
|
|
21,370
|
|
|
|
24,916
|
|
|
|
4,408
|
|
|
|
6,032
|
|
Stockholders equity
|
|
$
|
10,973,183
|
|
|
$
|
11,601,513
|
|
|
$
|
13,668,471
|
|
|
$
|
3,705,453
|
|
|
$
|
2,426,208
|
|
|
|
|
(g) |
|
During fiscal 2008, we borrowed $200 million under the
five-year $1 billion senior unsecured revolving credit
facility that we entered into in July 2006. As of March 28,
2008, we had $200 million in outstanding borrowings
included in Short-term borrowings on our Consolidated Balance
Sheets related to this credit facility and were in compliance
with all of the covenants. See Note 9 of the Notes to the
Consolidated Financial Statements in this annual report. |
|
(h) |
|
In fiscal 2006, in connection with our acquisition of Veritas,
we assumed $520 million of 0.25% convertible subordinated
notes, which are classified as a current liability and are
included in the calculation of working capital. These notes were
paid off in their entirety in August 2006. In October 2001, we
issued $600 million of 3% convertible subordinated notes.
In November 2004, substantially all of the outstanding 3%
convertible subordinated notes were converted into
70.3 million shares of our common stock and the remainder
was redeemed for cash. |
|
(i) |
|
In fiscal 2007, we issued $1.1 billion principal amount of
0.75% Convertible Senior Notes and $1.0 billion
principal amount of 1.00% Convertible Senior Notes. For
more information, see Note 9 of the Notes to Consolidated
Financial Statements in this annual report. |
|
(j) |
|
Included in Long-term obligations at March 28, 2008 is the
effect of a timing difference between cash payments on the OEM
placement fees and the expense recognized for accounting
purposes. See Managements Discussion and Analysis of
Financial Condition and Results of Operations
Financial Results and Trends for more discussion. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
OVERVIEW
Our
Business
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
March 28, 2008, March 30, 2007 and March 31,
2006. Our 2009 fiscal year will consist of 53 weeks and
will end on April 3, 2009.
28
On April 6, 2007, we completed our acquisition of Altiris
Inc., a leading provider of IT management software that enables
businesses to easily manage and service network-based endpoints.
We used approximately $841 million of our cash and cash
equivalents to fund the acquisition, which amount was net of
Altiris cash and cash equivalents balance. We believe this
acquisition enables us to help customers better manage and
enforce security policies at the endpoint, identify and protect
against threats, and repair and service assets.
On November 30, 2007, we completed our acquisition of
Vontu, Inc. (Vontu), a provider of Data Loss
Prevention (DLP) solutions that assists organizations in
preventing the loss of confidential or proprietary information,
for approximately $298 million in cash, which amount was
net of Vontus cash and cash equivalents balance. On
November 29, 2007, we borrowed $200 million under our
five-year $1 billion senior unsecured revolving credit
facility to partially finance this acquisition.
In February 2008, we contributed $150 million in cash to
our joint venture with Huawei Technologies Co., Ltd. in exchange
for a 49% interest in the joint venture. The joint venture will
develop, manufacture, market and support security and storage
appliances to global telecommunications carriers and enterprise
customers.
Our
Operating Segments
Our operating segments are significant strategic business units
that offer different products and services, distinguished by
customer needs. During the March 2008 quarter, we modified the
segment reporting structure in line with business operational
changes associated with Enrique Salems promotion to Chief
Operating Officer in January 2008. The following changes have
been made to our segment reporting structure: (1) the
Security and Data Management segment was renamed the Security
and Compliance segment; (2) the Altiris segment, in its
entirety, has been moved into the Security and Compliance
segment; (3) the Data Center Management segment was renamed
the Storage and Server Management segment; and (4) the
Backup Exec products were moved from the Security and Data
Management segment to the Storage and Server Management segment.
As a result of these changes, we now operate in five operating
segments: Security and Compliance, Storage and Server
Management, Consumer Products, Services, and Other. The new
business structure more directly aligns the operating segments
with markets and customers, and we believe will establish more
direct lines of reporting responsibilities, speed decision
making, and enhance the ability to pursue strategic growth
opportunities. All financial information from periods prior to
these changes in reportable segments contained in this annual
report has been recast, where appropriate, in this annual report
to reflect the revised segment reporting structure noted above.
For further descriptions of our operating segments, see
Note 19 of the Notes to Consolidated Financial Statements
in this annual report. Our reportable segments are the same as
our operating segments.
Financial
Results and Trends
Our net income was $464 million for fiscal 2008 as compared
to $404 million and $157 million for fiscal 2007 and
2006, respectively. The higher net income for fiscal 2008 as
compared to fiscal 2007 was primarily due to higher revenue in
fiscal 2008 compared to fiscal 2007 as well as a net gain from
settlements of litigation of $59 million in fiscal 2008 for
which there was no corresponding gain in fiscal 2007. Our net
income for fiscal 2008 was partially offset by higher operating
expenses, including a loss on sale of a business of
$95 million related to the disposition of our APM business,
for which there is no corresponding charge in fiscal 2007.
The higher net income for fiscal 2007 as compared to fiscal 2006
was primarily due to the write-off in fiscal 2006 of
$285 million of acquired in-process research and
development, or IPR&D, as a result of the Veritas
acquisition for which there is no comparable charge in fiscal
2007. This increase was partially offset by $154 million of
stock-based compensation expense related to our adoption of
Statement of Financial Accounting Standards, or SFAS,
No. 123R, Share-Based Payment, effective April 1,
2006, higher employee compensation costs resulting from
increased employee headcount, and $70 million of
restructuring charges compared to $25 million in fiscal
2006.
Revenue for fiscal 2008 was $5.9 billion, or 13%, higher
than revenue for fiscal 2007. For fiscal 2008 we realized
revenue growth across all of our geographic regions as compared
to fiscal 2007 and fiscal 2006 and experienced revenue growth in
all of our segments. Foreign currency fluctuations positively
impacted our
29
international revenue growth in fiscal 2008 compared to fiscal
2007. In fiscal 2007, foreign currency fluctuations also
positively impacted our revenue growth internationally compared
to fiscal 2006. 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 potentially greater impact on
our revenues and operating results. In addition, our April 2007
acquisition of Altiris contributed $194 million to our
revenue increase from fiscal 2007 to fiscal 2008.
Our deferred revenue at March 28, 2008 was 12% higher than
at the corresponding amount as of March 30, 2007. Increased
sales related to some of our enterprise products and the
depreciation of the U.S. dollar against foreign currencies
drove the increase in deferred revenue realized for the year
ended March 28, 2008. In recent periods, the percentage of
our in-period revenue that has resulted from the amortization of
our deferred revenue balance has been increasing, and we believe
this trend has normalized as we are over twelve months into the
transition of combining our buying programs for all of our
enterprise offerings. The factors contributing to the growth in
revenue and deferred revenue are discussed more fully in
Results of Operations below.
In the fourth quarter of fiscal 2007, we implemented a cost
savings initiative, which included a workforce reduction of
approximately 6% worldwide. We have fully implemented this cost
savings initiative in fiscal 2008. In the December 2007 quarter,
we implemented another restructuring plan to continue our focus
on controlling costs. These cost savings initiatives resulted in
restructuring charges totaling $74 million for the year
ended March 28, 2008 and we expect to incur additional
charges during fiscal year 2009 as a result of this plan.
Our gross margins and operating expenses were affected during
fiscal 2008 as a result of recent changes in the terms of some
of our relationships with key Original Equipment Manufacturers
(OEMs). We have negotiated new contract terms with
some of our OEM partners, which have resulted in some payments
to OEM partners being included in our Consolidated Statements of
Income as Operating expenses rather than Cost of revenues. In
general, payments to OEMs made on a placement fee per unit basis
will be treated as Operating expenses, while payments based on a
revenue-sharing model will be amortized as Cost of revenues. The
increase in Operating expenses will more than offset the
decrease in Cost of revenues because placement fee arrangements
are expensed on an estimated average cost basis, while
revenue-sharing arrangements are generally amortized ratably
over a one-year period, and because payments to OEMs increased.
These recent changes have largely been in effect for fiscal 2008
and we do not expect the trend relating to placement fees
increasing Operating expense and decreasing Cost of revenues to
continue.
Cash flows were strong in fiscal 2008 as we achieved
$1.8 billion in operating cash flow. We ended fiscal 2008
with $2.4 billion in cash, cash equivalents, and short-term
investments. In addition, during fiscal 2008 we repurchased
81 million shares of our common stock at an average price
of $18.53, for total consideration of $1.5 billion.
CRITICAL
ACCOUNTING ESTIMATES
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 Income, 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
30
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.
Revenue
Recognition
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, or 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 March 28, 2008, of
which $415 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 increasing
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. We recognize deferred revenue and inventory for the
respective revenue and cost of revenue amounts of 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 above 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 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. 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
31
current market conditions and economic trends when estimating
our reserves for rebates. If we made different estimates,
material differences may result in the amount and timing of our
net revenues for any period presented.
Valuation
of goodwill, intangible assets and long-lived
assets
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. At March 28, 2008, goodwill was
$11.2 billion, other intangible assets, net were
$1.2 billion, and acquired product rights, net were
$649 million. We assess goodwill and intangible assets with
indefinite life for impairment within our reporting units
annually or more often if 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 142).
The provisions of SFAS 142 require that a two-step
impairment test be performed on goodwill. In the first step, we
compare the fair value of each reporting unit to its carrying
value. Our reporting units are consistent with our reportable
segments. If the fair value of the reporting unit exceeds the
carrying value of the equity assigned to that unit, goodwill is
not considered to be impaired and we are not required to perform
further testing. If the carrying value of the equity assigned to
the reporting unit exceeds the fair value of the reporting unit,
then we must perform the second step of the impairment test in
order to determine the implied fair value of that reporting
units goodwill. If the carrying value of the reporting
units goodwill exceeds its implied fair value, then we
would record an impairment loss equal to the excess.
To determine the reporting units fair value in the current
year evaluation, 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. Our cash
flow assumptions are based on historical and forecasted revenue,
operating costs, growth rates and other relevant factors. If
managements estimates of future operating results change,
or if there are changes to other assumptions, the estimate of
the fair value of our goodwill could change significantly. Such
change could result in goodwill impairment charges in future
periods, which could have a significant impact on our operating
results and financial condition.
In the fourth quarter of fiscal 2008, we performed our annual
impairment analysis of goodwill. If managements estimates
of future operating results change, or if there are changes to
other assumptions, the estimate of the fair value of our
goodwill could change significantly. Such change could result in
goodwill impairment charges in future periods, which could have
a significant impact on our consolidated financial statements.
Intangible Assets. We assess the impairment of
other identifiable intangible assets according to SFAS 142
whenever events or changes in circumstances indicate that an
assets carrying amount may not be recoverable. An
impairment loss would be recognized when the sum of the
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
managements 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. During fiscal 2008 we recorded an
impairment charge of $95 million primarily for the write
down of intangible assets related to the sale of our Application
Performance Management business.
Long-Lived Assets. We account for long-lived
assets in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. We record impairment charges on long-lived
assets to be held and
32
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. During fiscal 2008, we recorded an impairment charge
of $1 million for our Newport News, VA building held for
sale.
Acquired Product Rights. We account for
acquired product rights in accordance with
SFAS No. 86, Accounting for Costs of Computer
Software to be Sold, Leased or Otherwise Marketed. 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. During
fiscal 2008, we did not have any indications of impairment.
Restructuring
We have estimated expenses for excess facilities related to
consolidating, moving, and relocating personnel or sites as a
result of restructuring activities and business acquisitions. In
determining our estimates, we obtain information from
third-party leasing agents to calculate anticipated third-party
sublease income and the vacancy period prior to finding a
sublessee. Market conditions may affect our ability to sublease
facilities on terms consistent with our estimates. Our ability
to sublease facilities on schedule or to negotiate lease terms
resulting in higher or lower sublease income than estimated may
affect our accrual for site closures. In addition, differences
between estimated and actual related broker commissions, tenant
improvements, and other exit costs may increase or decrease our
accrual upon final negotiation. If we made different estimates
regarding these various components of our excess facilities
costs, the amount recorded for any new period presented could
vary materially from those actually recorded.
Stock-based
Compensation
Effective April 1, 2006, we adopted the provisions of, and
accounted for stock-based compensation in accordance with,
SFAS No. 123R. Under SFAS No. 123R, we must
measure the fair value of all stock-based awards, including
stock options, restricted stock units, or RSUs, and purchase
rights under our employee stock purchase plan, or ESPP, on the
date of grant and amortize the fair value of the award over the
requisite service period. We elected the modified prospective
application method, under which prior periods are not revised
for comparative purposes. The valuation provisions of
SFAS No. 123R apply to new awards and to awards that
were outstanding as of the effective date and are subsequently
modified. For stock-based awards granted on or after
April 1, 2006, we recognize stock-based compensation
expense on a straight-line basis over the requisite service
period, which is generally the vesting period. We also recognize
estimated compensation expense for the unvested portion of
awards that were outstanding as of the effective date on a
straight-line basis over the remaining service period using the
compensation costs estimated for the SFAS No. 123 pro
forma disclosures.
We currently 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. We are required to estimate forfeitures at the time of
grant and revise those estimates in subsequent periods if actual
33
forfeitures differ from those estimates. We estimate forfeitures
of stock options, RSUs, and ESPP purchase rights at the time of
grant based on historical experience and record compensation
expense only for those awards that are expected to vest. All
stock-based awards are amortized on a straight-line basis over
the requisite service periods of the awards, which are generally
the vesting periods.
If factors change and we employ different assumptions for
estimating stock-based compensation expense in future periods or
if we decide to use a different valuation model, the amount of
such expense recorded in future periods may differ significantly
from what we have recorded in the current period.
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable, characteristics not
present in our option grants. Existing valuation models,
including the Black-Scholes and lattice binomial models, may not
provide reliable measures of the fair values of our stock-based
compensation. Consequently, there is a risk that our estimates
of the fair values of our stock-based compensation awards on the
grant dates may bear little resemblance to the actual values
realized upon the exercise, expiration, early termination, or
forfeiture of those stock-based payments in the future. Certain
stock-based payments, such as employee stock options, may expire
worthless or otherwise result in zero intrinsic value as
compared to the fair values originally estimated on the grant
date and reported in our financial statements. Alternatively,
value may be realized from these instruments that is
significantly higher than the fair values originally estimated
on the grant date and reported in our financial statements.
The application of these principles may be subject to further
interpretation and refinement over time. There are significant
differences among valuation models, and there is a possibility
that we will adopt different valuation models in the future.
This may result in a lack of consistency in future periods and
materially affect the fair value estimate of stock-based
payments. It may also result in a lack of comparability with
other companies that use different models, methods, and
assumptions.
Stock-based compensation expense related to employee stock
options, RSUs, and employee stock purchases recognized under
SFAS No. 123R for the year ended March 28, 2008
was $164 million.
Contingencies
and Litigation
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. As of
March 28, 2008, we recognized a loss for the pending
settlement of a class action lawsuit related to a
pre-acquisition contingency of Veritas for $21.5 million.
The amount was determined based upon existing facts and
circumstances of the outcome and estimates that we could
reasonably and likely pay.
Income
Taxes
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 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
34
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 Income. 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 Income, or to goodwill to the extent
that the valuation allowance related to tax attributes of the
acquired entities.
We failed to file in a timely fashion the final pre-acquisition
tax return for Veritas, and as a result, it is uncertain whether
we can claim a lower tax rate on a dividend made from a Veritas
foreign subsidiary under the American Jobs Creation Act of 2004.
We are currently petitioning the IRS for relief to allow us to
claim the lower rate of tax. Because we were unable to obtain
this relief prior to filing the Veritas tax return in May 2006,
we have paid $130 million of additional U.S. taxes.
The potential outcomes with respect to our payment of this
amount include:
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|
|
|
|
If we ultimately obtain relief from the IRS on this matter, the
$130 million that we paid in May 2006 may be refunded
to us and we will use that amount to increase our income tax
accrual for the Veritas transfer pricing disputes. For more
information see Note 17 of the Notes to Consolidated
Financial Statements in this annual report.
|
|
|
|
If we ultimately do not receive relief from the IRS on this
matter, and we otherwise have an adjustment arising from the
Veritas transfer pricing disputes, then we would only owe
additional tax with regard to such disputes to the extent that
such adjustment is in excess of $130 million.
|
|
|
|
If we ultimately do not receive relief from the IRS on this
matter, and we otherwise do not have an adjustment arising from
the Veritas transfer pricing disputes, then (1) we would be
required to adjust the purchase price of Veritas to reflect a
reduction in the amount of pre-acquisition tax liabilities
assumed; and (2) we would be required to recognize an equal
amount of income tax expense, up to $130 million.
|
In June 2006, the Financial Accounting Standards Board, or FASB,
issued Interpretation No., or FIN, 48, Accounting for
Uncertainty in Income Taxes an interpretation of
SFAS No. 109. The provisions of FIN 48 became
effective beginning in the first quarter of fiscal 2008. See
Newly Adopted and Recently Issued Accounting
Pronouncements under Summary of Significant Accounting
Policies included in the Consolidated Financial Statements in
this annual report for further discussion.
In December 2007, the FASB issued SFAS No. 141
(revised), Business Combinations. The accounting
treatment related to pre-acquisition uncertain tax positions
will change when SFAS No. 141(R) becomes effective,
which will be in first quarter of our fiscal year 2010. See
Newly Adopted and Recently Issued Accounting
Pronouncements under Summary of Significant Accounting
Policies included in the Consolidated Financial Statements in
this annual report for further discussion.
35
RESULTS
OF OPERATIONS
Total Net
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Net revenues
|
|
$
|
5,874,419
|
|
|
$
|
5,199,366
|
|
|
$
|
4,143,392
|
|
Period over period change
|
|
|
675,053
|
|
|
|
1,055,974
|
|
|
|
|
|
|
|
|
13
|
%
|
|
|
25
|
%
|
|
|
|
|
Net revenues increased in fiscal 2008 as compared to fiscal 2007
primarily due to higher amortization of deferred revenue as a
result of the higher amount of deferred revenue at the beginning
of the fiscal 2008 period than at the beginning of the fiscal
2007 period and increased sales related to our Backup Exec,
Storage Foundation, and Net Backup products. Our total deferred
revenue grew from $2.754 billion to $3.077 billion in
fiscal 2008 and grew from $2.163 billion to
$2.754 billion in fiscal 2007. The higher deferred revenue
balance at the beginning of fiscal 2008 is due to a greater
portion of the revenue from transactions being subject to
deferral since the beginning of the third quarter of fiscal 2007
than was the case in prior periods as discussed below. In
addition, we realized $194 million due to the new sales of
products from our April 6, 2007 acquisition of Altiris for
which there is no comparable revenue in the same prior year
period and a favorable foreign currency impact in fiscal 2008 as
compared to fiscal 2007.
As noted above, we realized an increase in recognized revenue
from deferred revenue in fiscal 2008. This increase in deferred
revenue resulted from combining our buying programs for all of
our enterprise offerings, negotiating more transactions that
commit customers to multi-year periods, offering more
flexibility in contractual terms and in product deployments, and
providing more services in combination with license and
maintenance sales. In the December 2006 quarter, we combined our
buying programs for all of our enterprise offerings to provide
our customers and partners a single vendor relationship and
simplify the way we do business. Previously, our storage and
availability products and services were sold under Veritas
pre-merger buying programs, while our security products and
services were sold under our historical buying programs. The
combination of buying programs resulted in a change in the VSOE
for some of our storage and availability products and services.
This change, coupled with an increased number of maintenance
renewals sold with a license component, resulted in a larger
portion of revenues associated with contracts being classified
as Content, subscriptions, and maintenance revenue, which is
subject to deferral, instead of Licenses revenue, which is
generally recognized immediately. These factors resulted in
lower recognized revenue growth rates in the first six months of
fiscal 2008 and in fiscal 2007.
Some of our customers have also requested increased flexibility
in product deployments in site license arrangements. This may
result in an increase in deferred revenue and classification of
all revenues associated with the specific contract as Content,
subscriptions, and maintenance revenue, which is recognized over
time, as VSOE may not exist in certain types of flexible
deployment contracts. As a result of our initiative to offer
customers a more comprehensive solution to protect and manage a
global IT infrastructure, we have seen an increasing amount of
services sold in conjunction with license and maintenance
contracts. Inclusion of such services often results in increased
deferred revenue and increased classification of revenues as
Content, subscriptions, and maintenance revenue, as VSOE may not
exist for some of the services provided.
Net revenues increased in fiscal 2007 as compared to fiscal 2006
primarily due to the new sales of the storage and availability
products and services from our July 2005 acquisition of Veritas
for the full twelve months in the 2007 period compared to nine
months in the 2006 period. We were required under purchase
accounting rules to reduce the amount of Veritas deferred
revenue that we recorded in connection with the acquisition of
Veritas to an amount equal to the fair value of our contractual
obligation related to that deferred revenue. Unless otherwise
specified, storage and availability products and
services include products and services obtained through
our acquisition of Veritas, and complementary products and
services obtained or developed subsequent to such acquisition.
These products and services contributed $518 million of net
revenues in the June 2006 quarter for which there was no
comparable revenue in the June 2005 quarter. The remainder of
the revenue increase is due to
36
increases in our consumer products revenue and services
offerings of $181 million and $92 million,
respectively, due to continued growth in demand. The segment
discussions that follow further describe the revenue increases.
These increases are partially offset by the effects of the
increased flexibility in contract terms and the combination of
our buying programs discussed above.
Content,
subscriptions, and maintenance revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Content, subscriptions, and maintenance revenues
|
|
$
|
4,561,566
|
|
|
$
|
3,917,572
|
|
|
$
|
2,873,211
|
|
Percentage of total net revenues
|
|
|
78
|
%
|
|
|
75
|
%
|
|
|
69
|
%
|
Period over period change
|
|
$
|
643,994
|
|
|
$
|
1,044,361
|
|
|
|
|
|
|
|
|
16
|
%
|
|
|
36
|
%
|
|
|
|
|
Beginning with the release of our 2006 consumer products that
include content updates in the December 2005 quarter, we
recognize revenue related to these products ratably. As a
result, this revenue has been classified as Content,
subscriptions, and maintenance beginning in the December 2005
quarter. In addition, as noted above, increased flexibility in
contract terms and the combination of our buying programs in the
December 2006 quarter have impacted revenue recognition. These
changes caused a larger portion of revenue associated with
contracts to be classified as Content, subscriptions, and
maintenance revenue, which is subject to deferral, instead of
Licenses revenue, which is generally recognized immediately, as
discussed above in Total Net Revenues.
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, for the
reasons discussed above in Total Net Revenues. In
addition, Content, subscriptions, and maintenance revenues
increased $82 million from new sales of products from our
acquisition of Altiris for which there is no comparable revenue
in the prior period. The increase is also due to a favorable
foreign currency impact.
Content, subscriptions, and maintenance revenues increased in
fiscal 2007 as compared to fiscal 2006 primarily due to the new
sales of the storage and availability products and services from
our acquisition of Veritas for the full twelve months in the
2007 period compared to nine months in the 2006 period. These
products and services contributed $250 million of Content,
subscriptions, and maintenance revenues in the June 2006 quarter
for which there was no comparable revenue in the June 2005
quarter. In addition, in fiscal 2007, Content, subscriptions,
and maintenance revenue related to our enterprise products
increased $271 million due to the fact that the amount of
revenue recognized in the comparable 2006 period was lower as a
result of the purchase accounting adjustment discussed under
Total Net Revenues above. Revenue related to our
consumer products increased $179 million as compared to the
2006 period due primarily to growth in Norton Internet Security
products and online revenues due to growth in the use of the
Internet, and increased awareness and sophistication of security
threats. Enterprise products and services, excluding
Veritas-related products and services, increased
$309 million as a result of growth in our maintenance
renewals due to an increasing installed base, increased demand
for our service offerings, other acquisitions, and the
combination of our buying programs implemented in the December
2006 quarter, which impacted our VSOE methodology and
classification of Licenses revenue and Content, subscriptions,
and maintenance revenue, as discussed above under Total
Net Revenues.
37
Licenses
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Licenses revenues
|
|
$
|
1,312,853
|
|
|
$
|
1,281,794
|
|
|
$
|
1,270,181
|
|
Percentage of total net revenues
|
|
|
22
|
%
|
|
|
25
|
%
|
|
|
31
|
%
|
Period over period change
|
|
$
|
31,059
|
|
|
$
|
11,613
|
|
|
|
|
|
|
|
|
2
|
%
|
|
|
1
|
%
|
|
|
|
|
Licenses revenue increased in fiscal 2008 as compared to fiscal
2007 primarily due to an increase of $112 million from new
sales of products from our acquisition of Altiris for which
there is no comparable revenue in the prior period and a
favorable foreign currency impact. This increase is offset by a
decrease in license revenues from the Security and Compliance
and Storage and Server Management segments of $68 million
(excluding acquired Altiris products, which mitigated the
decline in license revenues from those products), as a result of
increased flexibility in contract terms and the combination of
our buying programs in the December 2006 quarter, causing a
larger portion of revenue associated with contracts to be
classified as Content, subscriptions, and maintenance revenue
instead of Licenses revenue during the first half of fiscal 2008.
Licenses revenue increased in fiscal 2007 as compared to fiscal
2006 primarily due to the inclusion of the storage and
availability products obtained through our acquisition of
Veritas for the full twelve months in the 2007 period compared
to nine months in the 2006 period. These products contributed
$268 million of Licenses revenues in the June 2006 quarter
for which there was no comparable revenue in the June 2006
quarter. Excluding this June 2006 contribution, License revenues
were down in both Security and Data Management and Data Center
Management segments as a result of the increased flexibility in
contract terms and the combination of our buying programs
implemented in the December 2006 quarter, both of which caused a
larger portion of contracts to be classified as Content,
subscriptions, and maintenance, which is subject to deferral,
instead of Licenses revenue, which is generally recognized
immediately, as discussed above in Total Net
Revenues.
Net
revenues and operating income by segment
Consumer
Products segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Consumer Products revenues
|
|
$
|
1,746,089
|
|
|
$
|
1,590,505
|
|
|
$
|
1,409,580
|
|
Percentage of total net revenues
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
34
|
%
|
Period over period change
|
|
$
|
155,584
|
|
|
$
|
180,925
|
|
|
|
|
|
|
|
|
10
|
%
|
|
|
13
|
%
|
|
|
|
|
Consumer Products operating income
|
|
$
|
938,627
|
|
|
$
|
931,989
|
|
|
$
|
950,508
|
|
Percentage of Consumer Products revenues
|
|
|
54
|
%
|
|
|
59
|
%
|
|
|
67
|
%
|
Period over period change
|
|
$
|
6,638
|
|
|
$
|
(18,519
|
)
|
|
|
|
|
|
|
|
1
|
%
|
|
|
(2
|
)%
|
|
|
|
|
Consumer Products revenues increased in fiscal 2008 compared to
fiscal 2007 due to an aggregate increase of $286 million in
revenue from our Norton Internet Security and Norton 360
products. These increases are due to the increase in demand for
these products during both fiscal 2007 and fiscal 2008, as the
revenue from our consumer products is generally recognized
ratably over the 12 months after the product is sold. These
increases are partially offset by aggregate decreases of
$129 million in revenue from our Norton AntiVirus and
Norton System Works products. This decrease results from our
customers continued migration to our Norton Internet
Security product and our new Norton 360 product, which offer
broader protection and backup features to address the rapidly
changing threat environment. Our electronic orders include sales
derived from OEMs, subscriptions, upgrades, online sales, and
renewals. Revenue from electronic orders (which includes sales
of the aforementioned products)
38
grew by $174 million in fiscal 2008 as compared to fiscal
2007. Included in the total Consumer Products segment revenue
increase is a favorable foreign currencies impact.
Consumer Products revenues increased in fiscal 2007 as compared
to fiscal 2006 primarily due to an increase of $293 million
in revenue from our Norton Internet Security products. This
increase was partially offset by aggregate decreases in revenue
from our Norton AntiVirus and Norton System
Workstm
products of $100 million. These decreases resulted from our
customers migration to the Norton Internet Security
products, which offer broader protection to address the rapidly
changing threat environment. Our electronic orders include OEM
subscriptions, upgrades, online sales, and renewals. Revenue
from electronic orders (which includes sales of our Norton
Internet Security products and our Norton AntiVirus products)
grew by $221 million in fiscal 2007 as compared to fiscal
2006.
Total expenses from our Consumer segment increased
$183 million in fiscal 2008 as compared to fiscal 2007. The
increase is primarily a result of higher OEM placement fees,
which is primarily a result of placement fees being recognized
as operating expense as discussed in Cost of
Revenues below.
Total expenses increased $160 million in fiscal 2007 as
compared to fiscal 2006. The increase is driven by higher OEM
placement fees. The balance of the increase is primarily a
result of higher salary and related expenses.
Security
and Compliance Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Security and Compliance revenues
|
|
$
|
1,630,133
|
|
|
$
|
1,408,906
|
|
|
$
|
1,303,476
|
|
Percentage of total net revenues
|
|
|
28
|
%
|
|
|
27
|
%
|
|
|
31
|
%
|
Period over period change
|
|
$
|
221,227
|
|
|
$
|
105,430
|
|
|
|
|
|
|
|
|
16
|
%
|
|
|
8
|
%
|
|
|
|
|
Security and Compliance operating income
|
|
$
|
256,207
|
|
|
$
|
223,374
|
|
|
$
|
225,876
|
|
Percentage of Security and Compliance revenues
|
|
|
16
|
%
|
|
|
16
|
%
|
|
|
17
|
%
|
Period over period change
|
|
$
|
32,833
|
|
|
$
|
(2,502
|
)
|
|
|
|
|
|
|
|
15
|
%
|
|
|
(1
|
)%
|
|
|
|
|
Security and Compliance revenues increased in fiscal 2008
compared to fiscal 2007 primarily due to $194 million of
new sales of products from our acquisition of Altiris for which
there is no comparable revenue in the same prior year period.
Included in the total Security and Compliance segment revenue
increase is a favorable foreign currencies impact.
Security and Compliance revenues increased in fiscal 2007 as
compared to fiscal 2006 primarily due to new sales of our
Enterprise Vault product, which was acquired with Veritas, for
the full twelve months in the 2007 period compared to nine
months in the 2006 period. This product contributed
$38 million of revenue in the June 2006 quarter for which
there was no comparable revenue in the June 2005 quarter. In
addition the purchase accounting adjustment, discussed under
Total Net Revenues above, contributed
$20 million (cumulatively) in the September 2006, December
2006, and March 2007 quarters as compared to the comparable
quarters of the prior year. In addition, revenues increased
$34 million in fiscal 2007 as a result of acquisitions,
excluding Veritas, for which there was not a full twelve months
of revenue or no comparable revenue in fiscal 2006.
Total expenses from our Security and Compliance segment
increased $169 million in fiscal 2008 as compared to fiscal
2007. The increase is primarily a result of higher salary and
commissions which includes the impact of the fiscal 2008 Altiris
and Vontu acquisitions.
39
Storage
and Server Management Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Storage and Server Management revenues
|
|
$
|
2,136,307
|
|
|
$
|
1,906,607
|
|
|
$
|
1,229,091
|
|
Percentage of total net revenues
|
|
|
36
|
%
|
|
|
37
|
%
|
|
|
30
|
%
|
Period over period change
|
|
$
|
229,700
|
|
|
$
|
677,516
|
|
|
|
|
|
|
|
|
12
|
%
|
|
|
55
|
%
|
|
|
|
|
Storage and Server Management operating income
|
|
$
|
884,619
|
|
|
$
|
779,573
|
|
|
$
|
410,840
|
|
Percentage of Storage and Server Management revenues
|
|
|
41
|
%
|
|
|
41
|
%
|
|
|
33
|
%
|
Period over period change
|
|
$
|
105,046
|
|
|
$
|
368,733
|
|
|
|
|
|
|
|
|
13
|
%
|
|
|
90
|
%
|
|
|
|
|
Storage and Server Management revenues increased in fiscal 2008
compared to fiscal 2007 primarily due to an aggregate increase
in revenue from our Backup Exec, Storage Foundation, and Net
Backup products of $203 million, driven by increased demand
for products related to the standardization and simplification
of data center infrastructure and higher amortization of
deferred revenue, as a result of the higher amount of deferred
revenue at the beginning of fiscal 2008 than at the beginning of
fiscal 2007, for the reasons discussed above in Total Net
Revenues. Included in the total Storage and Server
Management segment revenue increase is a favorable foreign
currencies impact.
Storage and Server Management revenues increased in fiscal 2007
compared to fiscal 2006 primarily due to new sales of storage
and availability products from our acquisition of Veritas for
the full twelve month period compared to nine months in the
fiscal 2006 period. These products contributed $452 million
of revenue in the June 2006 quarter for which there was no
comparable revenue in the June 2005 quarter. The effect of the
purchase accounting adjustment discussed under Total Net
Revenues above also contributed $220 million to the
increase in revenue in fiscal 2007. Excluding the effects of the
aforementioned items, revenue in fiscal 2007 as compared to
fiscal 2006 was relatively flat due to the combination of the
buying programs for all of our enterprise offerings in the
December 2006 quarter. This combination resulted in lower
recognized revenue and increased deferred revenue as discussed
under Total Net Revenues above.
Total expenses from our Storage and Server Management segment
increased $130 million in fiscal 2008 as compared to fiscal
2007. The increase is primarily a result of the impairment of
intangible assets related to the APM business of
$95 million. Additionally, increases in Sales expenses
drove costs higher for the Storage and Server Management group.
Services
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Services revenues
|
|
$
|
359,955
|
|
|
$
|
293,226
|
|
|
$
|
201,217
|
|
Percentage of total net revenues
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
5
|
%
|
Period over period change
|
|
$
|
66,729
|
|
|
$
|
92,009
|
|
|
|
|
|
|
|
|
23
|
%
|
|
|
46
|
%
|
|
|
|
|
Services operating loss
|
|
$
|
(26,511
|
)
|
|
$
|
(43,606
|
)
|
|
$
|
(20,450
|
)
|
Percentage of Services revenues
|
|
|
(7
|
)%
|
|
|
(15
|
)%
|
|
|
(10
|
)%
|
Period over period change
|
|
$
|
17,095
|
|
|
$
|
(23,156
|
)
|
|
|
|
|
|
|
|
(39
|
)%
|
|
|
113
|
%
|
|
|
|
|
Services revenues increased in fiscal 2008 compared to fiscal
2007 primarily due to an increase in consulting services of
$48 million 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
40
capabilities of their own IT staff with our onsite consultants.
In addition, Services revenue increased $11 million due to
increased demand for our Business Critical Services in fiscal
2008 as compared to fiscal 2007.
Services revenue increased in fiscal 2007 as compared to fiscal
2006 primarily due to a $57 million increase in security
consulting services and the inclusion of the storage and
availability services obtained through our acquisition of
Veritas for the full twelve months in the 2007 period compared
to nine months in the 2006 period. Included in the above
increase is $28 million of Services revenues from these
acquired services offerings in the June 2006 quarter for which
there was no comparable revenue in the June 2005 quarter. In
addition, Services revenue increased $15 million due to
increased demand for our Business Critical Services in fiscal
2007 as compared to fiscal 2006.
Total expenses from our Services segment increased
$32 million in fiscal 2008 as compared to fiscal 2007. The
increase is primarily a result of higher salary and wages to
support the increase in revenue.
Other
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Other revenues
|
|
$
|
1,935
|
|
|
$
|
122
|
|
|
$
|
28
|
|
Percentage of total net revenues
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Period over period change
|
|
$
|
1,813
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
1486
|
%
|
|
|
336
|
%
|
|
|
|
|
Other operating loss
|
|
|
(1,450,662
|
)
|
|
|
(1,371,588
|
)
|
|
$
|
(1,292,809
|
)
|
Period over period change
|
|
$
|
(79,074
|
)
|
|
$
|
(78,779
|
)
|
|
|
|
|
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
|
|
Revenue from our Other segment is comprised primarily of sunset
products and products nearing the end of their life cycle.
Revenues from the Other segment for fiscal 2008 compared to
fiscal 2007 and for fiscal 2007 compared to fiscal 2006 were
immaterial. The Other segment also includes general and
administrative expenses; amortization of acquired product
rights, other intangible assets, and other assets; charges, such
as acquired in-process research and development, stock-based
compensation, and restructuring; and certain indirect costs that
are not charged to the other operating segments.
Net
revenues by geographic region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Americas (U.S., Canada and Latin America)
|
|
$
|
3,095,493
|
(1)
|
|
$
|
2,840,572
|
(2)
|
|
$
|
2,257,937
|
(3)
|
Percentage of total net revenues
|
|
|
53
|
%
|
|
|
54
|
%
|
|
|
54
|
%
|
Period over period change
|
|
$
|
254,921
|
|
|
$
|
582,635
|
|
|
|
|
|
|
|
|
9
|
%
|
|
|
26
|
%
|
|
|
|
|
EMEA (Europe, Middle East, Africa)
|
|
$
|
1,963,319
|
|
|
$
|
1,644,177
|
|
|
$
|
1,321,968
|
|
Percentage of total net revenues
|
|
|
33
|
%
|
|
|
32
|
%
|
|
|
32
|
%
|
Period over period change
|
|
$
|
319,142
|
|
|
$
|
322,209
|
|
|
|
|
|
|
|
|
19
|
%
|
|
|
24
|
%
|
|
|
|
|
Asia Pacific/Japan
|
|
$
|
815,607
|
|
|
$
|
714,617
|
|
|
$
|
563,487
|
|
Percentage of total net revenues
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
14
|
%
|
Period over period change
|
|
$
|
100,990
|
|
|
$
|
151,130
|
|
|
|
|
|
|
|
|
14
|
%
|
|
|
27
|
%
|
|
|
|
|
Total net revenues
|
|
$
|
5,874,419
|
|
|
$
|
5,199,366
|
|
|
$
|
4,143,392
|
|
41
|
|
|
(1) |
|
Americas includes net revenues from the United States of
$2.8 billion, Canada of $171 million, and Latin
America of $110 million during fiscal 2008. |
|
(2) |
|
Americas includes net revenues from the United States of
$2.6 billion, Canada of $176 million, and Latin
America of $104 million during fiscal 2007. |
|
(3) |
|
Americas includes net revenues from the United States of
$2.0 billion, Canada of $140 million, and Latin
America of $72 million during fiscal 2006. |
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
products of $272 million, 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
contributed $179 million in 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 by $72 million
and $122 million, respectively, for which there is no
comparable revenue in the prior period. Growth in revenues in
international regions and the Americas from sales of products of
our Consumer Products of $96 million and $60 million,
respectively, 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.
International revenues increased in fiscal 2007 as compared to
fiscal 2006 primarily due to new sales of storage and
availability products and services from our acquisition of
Veritas for the full twelve months in the 2007 period compared
to nine months in the 2006 period. These products and services
contributed $232 million of international revenues in the
June 2006 quarter for which there was no comparable revenue in
the June 2005 quarter. In the Americas, these products
contributed $286 million in the June 2006 quarter for which
there was no comparable revenue in the June 2005 quarter. In
addition, a portion of the revenue increase in fiscal 2007 is
due to the fact that the amount of revenue recognized in the
comparable 2006 period was lower as a result of the purchase
accounting adjustment discussed under Total Net
Revenues above. The purchase accounting adjustment
increased fiscal 2007 revenues by $188 million in the
Americas and $83 million in the international regions
compared to fiscal 2006. Growth in our Consumer Products
segment, driven by Norton Internet Security, resulted in a
$129 million increase in the international regions and a
$52 million increase in the Americas in fiscal 2007
revenues versus fiscal 2006. Both domestic and international
revenue from enterprise offerings were negatively impacted
primarily due to the increased flexibility in our contract terms
and the combination of our buying programs. These changes
resulted in a larger portion of contracts being subject to
deferral and a correspondingly lower amount of revenue
recognized in the current period, as discussed in Total
Net Revenues above. Foreign currencies had a favorable
impact on net revenues in fiscal 2007 compared to fiscal 2006.
We are unable to predict the extent to which revenues in future
periods will be impacted by changes in foreign currency exchange
rates. If international sales become a greater portion of our
total sales in the future, changes in foreign currency exchange
rates may have a potentially greater impact on our revenues and
operating results.
Cost of
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Cost of revenues
|
|
$
|
1,220,330
|
|
|
$
|
1,215,826
|
|
|
$
|
981,869
|
|
Gross margin
|
|
|
79
|
%
|
|
|
77
|
%
|
|
|
76
|
%
|
Period over period change
|
|
$
|
4,504
|
|
|
$
|
233,957
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
24
|
%
|
|
|
|
|
Cost of revenues consists primarily of amortization of acquired
product rights, fee-based technical support costs, 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.
42
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.
Cost
of content, subscriptions, and maintenance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Cost of content, subscriptions, and maintenance
|
|
$
|
826,339
|
|
|
$
|
823,525
|
|
|
$
|
621,636
|
|
As a percentage of related revenue
|
|
|
18
|
%
|
|
|
21
|
%
|
|
|
22
|
%
|
Period over period change
|
|
$
|
2,814
|
|
|
$
|
201,889
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
32
|
%
|
|
|
|
|
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 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.
We expect the impact of moving many of our OEM payments from
Cost of revenues to Operating expenses to be reduced in future
periods as the change had been in effect for most of fiscal
2008. Our past OEM payments were primarily revenue-sharing
arrangements, which were generally amortized to Cost of revenues
over a one-year period. Several of the arrangements negotiated
in late fiscal 2007 are placement fee arrangements, for which
the costs are expensed on an estimated average cost basis and
classified as operating expenses.
Cost
of licenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Cost of licenses
|
|
$
|
44,664
|
|
|
$
|
49,968
|
|
|
$
|
45,943
|
|
As a percentage of related revenue
|
|
|
3
|
%
|
|
|
4
|
%
|
|
|
4
|
%
|
Period over period change
|
|
$
|
(5,304
|
)
|
|
$
|
4,025
|
|
|
|
|
|
|
|
|
(11
|
)%
|
|
|
9
|
%
|
|
|
|
|
Cost of licenses consists primarily of royalties paid to third
parties under technology licensing agreements and manufacturing
and direct material costs.
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 the
Companys decision to exit certain aspects of the appliance
business.
43
Amortization
of acquired product rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Amortization of acquired product rights
|
|
$
|
349,327
|
|
|
$
|
342,333
|
|
|
$
|
314,290
|
|
Percentage of total net revenues
|
|
|
6
|
%
|
|
|
7
|
%
|
|
|
8
|
%
|
Period over period change
|
|
$
|
6,994
|
|
|
$
|
28,043
|
|
|
|
|
|
|
|
|
2
|
%
|
|
|
9
|
%
|
|
|
|
|
Acquired product rights are comprised of developed technologies
and patents from acquired companies. 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 4 and 7 of the Notes to
Consolidated Financial Statements in this annual report.
Operating
Expenses
Sales
and marketing expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Sales and marketing
|
|
$
|
2,415,264
|
|
|
$
|
2,007,651
|
|
|
$
|
1,499,904
|
|
Percentage of total net revenues
|
|
|
41
|
%
|
|
|
39
|
%
|
|
|
36
|
%
|
Period over period change
|
|
$
|
407,613
|
|
|
$
|
507,747
|
|
|
|
|
|
|
|
|
20
|
%
|
|
|
34
|
%
|
|
|
|
|
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.
Sales and marketing expense as a percentage of total revenues
increased to 39% in fiscal 2007 as compared to 36% in fiscal
2006. The percentage increase and increase in absolute dollars
in sales and marketing expenses in fiscal 2007 as compared to
fiscal 2006 is primarily due to higher employee compensation
expense of approximately $335 million resulting from an
increase in employee headcount. Higher employee compensation
expense includes the effect of adopting of
SFAS No. 123R, which added $56 million of
stock-based compensation expense in fiscal 2007 for which there
is no comparable expense in fiscal 2006. In addition,
approximately $171 million of the increase is due to an
additional three months of sales and marketing expenses related
to the Veritas acquisition, which is included for the full year
of fiscal 2007 as compared to nine months in fiscal 2006.
Advertising expense increased in fiscal 2007 as compared to
fiscal 2006 primarily as a result of changes in our OEM
arrangements.
Research
and development expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Research and development
|
|
$
|
895,242
|
|
|
$
|
866,882
|
|
|
$
|
682,125
|
|
Percentage of total net revenues
|
|
|
15
|
%
|
|
|
17
|
%
|
|
|
16
|
%
|
Period over period change
|
|
$
|
28,360
|
|
|
$
|
184,757
|
|
|
|
|
|
|
|
|
3
|
%
|
|
|
27
|
%
|
|
|
|
|
44
Research and development expense as a percentage of total
revenues has remained relatively constant in fiscal 2008, fiscal
2007 and fiscal 2006. 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. The increase in fiscal 2007 as compared
to fiscal 2006 was due primarily to higher employee compensation
expense of approximately $108 million resulting from an
increase in employee headcount. Higher employee compensation
expense includes the effect of adopting of
SFAS No. 123R, which added $57 million of
stock-based compensation expense in fiscal 2007 for which there
is no comparable expense in fiscal 2006. In addition,
approximately $96 million of the increase is due to an
additional three months of research and development expenses
related to the Veritas acquisition, which is included for the
full year of fiscal 2007 as compared to nine months in fiscal
2006.
General
and administrative expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
General and administrative
|
|
$
|
347,642
|
|
|
$
|
316,783
|
|
|
$
|
228,563
|
|
Percentage of total net revenues
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
Period over period change
|
|
$
|
30,859
|
|
|
$
|
88,220
|
|
|
|
|
|
|
|
|
10
|
%
|
|
|
39
|
%
|
|
|
|
|
General and administrative expense as a percentage of total
revenues has remained relatively constant in fiscal 2008, fiscal
2007, and fiscal 2006. The increase in 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. The increase in
absolute dollars in general and administrative expenses in
fiscal 2007 as compared to fiscal 2006 was due primarily to
higher employee compensation expense of approximately
$73 million resulting from an increase in employee
headcount. Higher employee compensation includes the effect of
adopting SFAS No. 123R, which added $24 million
of stock-based compensation expense in fiscal 2007 for which
there is no comparable expense in fiscal 2006. In addition,
approximately $20 million of the increase is due to an
additional three months of general and administrative expenses
related to the Veritas acquisition, which are included for the
full year in fiscal 2007 as compared to nine months in fiscal
2006.
Amortization
of other purchased intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Amortization of other purchased intangible assets
|
|
$
|
225,131
|
|
|
$
|
201,502
|
|
|
$
|
148,822
|
|
Percentage of total net revenues
|
|
|
4
|
%
|
|
|
4
|
%
|
|
|
4
|
%
|
Period over period change
|
|
$
|
23,629
|
|
|
$
|
52,680
|
|
|
|
|
|
|
|
|
12
|
%
|
|
|
35
|
%
|
|
|
|
|
Other purchased intangible assets are comprised of customer
base, tradenames, partnership agreements, and marketing-related
assets. 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. The increased amortization in fiscal 2007 is primarily
associated with a full year of amortization associated with the
Veritas acquisition which occurred in July 2005 and the
acquisitions of Company-i Limited and 4FrontSecurity, Inc. that
occurred during fiscal 2007. For further discussion of other
intangible assets from acquisitions and related amortization,
see Note 7 of the Notes to Consolidated Financial
Statements in this annual report.
Acquired
in-process research and development (IPR&D)
During fiscal 2006, we wrote off IPR&D totaling
$285 million, of which $284 million was in connection
with our acquisition of Veritas. The IPR&D was written off
because the acquired technologies had not reached technological
feasibility and had no alternative uses. Technological
feasibility is defined as being equivalent to
45
completion of a beta-phase working prototype in which there is
no remaining risk relating to the development. At the time of
the acquisition in July 2005, Veritas was developing new
products in multiple product areas that qualify as IPR&D.
These efforts included NetBackup 6.1, Backup Exec 11.0, Server
Management 5.0, and various other projects. At the time of the
acquisition, it was estimated that these IPR&D development
efforts would be completed over the following 12 to
18 months at an estimated total cost of $120 million.
As of March 28, 2008, all IPR&D projects had been
completed on schedule and within expected costs.
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Restructuring
|
|
$
|
73,914
|
|
|
$
|
70,236
|
|
|
$
|
24,918
|
|
Percentage of total net revenues
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
Period over period change
|
|
$
|
3,678
|
|
|
$
|
45,318
|
|
|
|
|
|
|
|
|
5
|
%
|
|
|
182
|
%
|
|
|
|
|
In fiscal 2008, we approved and initiated a restructuring plan
(2008 Plan) to reduce costs, implement management
structure changes and optimize the business structure and
discontinue certain products. Projects within the plan began in
the third quarter of 2008 and are expected to be completed by
the fourth quarter of 2009. Total remaining costs of the
restructuring plan, consisting of severance and benefits and
excess facilities costs, are estimated to range between
approximately $80 million and $110 million. In fiscal
2007, we entered into restructuring plans (2007
Plans) to consolidate facilities and reduce operating
costs through headcount reductions. We also consolidated certain
facilities and exited facilities as a result of earlier
acquisitions. In fiscal 2006, we entered into restructuring
plans (2006 Plans) to reduce job redundancy in the
Americas, EMEA and Asia Pacific Japan and to consolidate certain
facilities in Europe and Asia. Future severance and benefit
costs and facilities charges for both the 2007 Plans and 2006
Plans are not expected to be significant.
We recognized $74 million in restructuring charges in
fiscal 2008 compared to $70 million in fiscal 2007. Charges
in fiscal 2008 were $59 million of severance and benefit
costs and $15 million for contract termination costs for
exited facilities. In fiscal 2008, severance and benefit costs
of $42 million related to the 2008 Plan and
$16 million related to the 2007 Plans. In addition,
facilities contract termination costs of $9 million related
to the 2007 Plans and $5 million were acquisition-related
charges for Altiris and Vontu that occurred in fiscal 2008. In
fiscal 2007, severance and benefit costs of $69 million and
an insignificant amount for facilities termination costs for the
2007 Plans. Included in the $69 million for severance and
benefit costs were $13 million which were
acquisition-related charges for Veritas and others that occurred
in fiscal 2006. In fiscal 2006, we recognized $18 million
of severance and benefit costs and $7 million for contract
termination costs for exited facilities were recognized.
Integration
In fiscal 2007, we recorded $1 million of integration
charges in connection with our April 2007 acquisition of
Altiris. These integration charges consisted of costs incurred
for consulting services and other professional fees. In
connection with our acquisition of Veritas, we recorded
integration costs of $16 million in fiscal 2006, which
consisted primarily of costs incurred for consulting services
and other professional fees.
46
Non-operating
Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Interest income
|
|
$
|
76,896
|
|
|
$
|
122,043
|
|
|
$
|
108,404
|
|
Interest expense
|
|
|
(29,480
|
)
|
|
|
(27,233
|
)
|
|
|
(17,996
|
)
|
Settlements of litigation, net
|
|
|
58,500
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
4,327
|
|
|
|
17,070
|
|
|
|
(1,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
110,243
|
|
|
$
|
111,880
|
|
|
$
|
88,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total net revenues
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
Period over period change
|
|
$
|
(1,637
|
)
|
|
$
|
23,122
|
|
|
|
|
|
|
|
|
(1
|
)%
|
|
|
26
|
%
|
|
|
|
|
The decrease in Interest income in fiscal 2008 as compared to
fiscal 2007 was due to lower average interest rates and a lower
average Cash and cash equivalents and Short-term investment
balances. The increase in Interest income in fiscal 2007 as
compared to fiscal 2006 was due primarily to a higher average
cash and cash equivalents and investment balances and higher
average interest rates realized on those balances.
Interest expense in fiscal 2008 and fiscal 2007 was due
primarily 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. The 0.25% Veritas Convertible Subordinated Notes were
paid in full during August 2006. Interest expense in fiscal 2006
was due primarily to the Veritas 0.25% Convertible
Subordinated Notes.
In fiscal 2008 we recorded a net gain from Settlements of
litigation.
In fiscal 2007, Other income (expense), net includes a gain of
$20 million on the sale of our buildings in Milpitas,
California, and Maidenhead, United Kingdom.
Provision
for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands)
|
|
|
Tax provision on earnings
|
|
$
|
248,673
|
|
|
$
|
227,242
|
|
|
$
|
227,068
|
|
Effective tax rate on earnings
|
|
|
35
|
%
|
|
|
36
|
%
|
|
|
63
|
%
|
Tax provision on repatriation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(21,197
|
)
|
Total tax provision
|
|
$
|
248,673
|
|
|
$
|
227,242
|
|
|
$
|
205,871
|
|
Total effective tax rate
|
|
|
35
|
%
|
|
|
36
|
%
|
|
|
57
|
%
|
Our effective tax rate on Income before income taxes was
approximately 35%, 36%, and 57% in fiscal 2008, 2007, and 2006,
respectively. 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
effective tax rate for fiscal 2006 reflects the impact of the
IPR&D charges and other acquisition-related charges that
are nondeductible for tax reporting purposes, partially offset
by foreign earnings taxed at a lower rate than the U.S. tax
rate, and the effect of the
true-up of
taxes on repatriated earnings.
We believe realization of substantially all of our deferred tax
assets as of March 28, 2008 of $694 million, after
application of the valuation allowance, is more likely than not
based on the future reversal of temporary tax differences.
Realization of approximately $55 million of our deferred
tax assets as of March 28, 2008 is dependent upon future
taxable earnings exclusive of reversing temporary differences in
certain foreign jurisdictions. Levels of future taxable income
are subject to the various risks and uncertainties discussed in
Item 1A, Risk Factors, set forth
47
in this annual report. An additional valuation allowance against
net deferred tax assets may be necessary if it is more likely
than not that all or a portion of the net deferred tax assets
will not be realized. We will assess the need for an additional
valuation allowance on a quarterly basis. Of the
$38 million total valuation allowance provided against our
deferred tax assets, approximately $30 million is
attributable to acquisition-related assets, the benefit of which
will reduce goodwill when and if realized. The valuation
allowance decreased by $22 million in fiscal 2008;
$19 million was reclassified as FIN 48 reserves,
$3 million was attributable to acquisition-related assets.
American
Jobs Creation Act of 2004 Repatriation of foreign
earnings
In the March 2005 quarter, we repatriated $500 million from
certain of our foreign subsidiaries that qualified for the 85%
dividends received deduction under the provisions of the
American Jobs Creation Act of 2004, or the Jobs Act, enacted in
October 2004. In May 2005, clarifying language was issued by the
U.S. Department of Treasury and the IRS with respect to the
treatment of foreign taxes paid on the earnings repatriated
under the Jobs Act and in September 2005, additional clarifying
language was issued regarding the treatment of certain
deductions attributable to the earnings repatriation. As a
result of this clarifying language, we reduced the tax expense
attributable to the repatriation by approximately
$21 million in fiscal 2006.
Other
tax matters
On March 29, 2006, we received a Notice of Deficiency from
the IRS claiming that we owe additional taxes, plus interest and
penalties, for the 2000 and 2001 tax years based on an audit of
Veritas. The incremental tax liability asserted by the IRS was
$867 million, excluding penalties and interest. On
June 26, 2006, we filed a petition with the U.S. Tax
Court protesting the IRS claim for such additional taxes. On
August 30, 2006, the IRS answered our petition and this
issue has been docketed for trial in U.S. Tax Court and is
scheduled to begin on June 30, 2008. 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 has also agreed to waive the assessment of penalties. In a
Motion to Amend filed March 20, 2008, the IRS moved to
change its position on the remaining issue in the case. If
allowed, the IRS new position would decrease the
incremental tax liability for the remaining issue to
approximately $545 million, excluding interest.
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. No
payments will be made on the assessment until the issue is
definitively resolved. If, upon resolution, we are required to
pay an amount in excess of our provision for this matter, the
incremental amounts due would be accounted for principally as
additions to the cost of the Veritas purchase price. Any
incremental interest accrued subsequent to the date of the
Veritas acquisition would be recorded as an expense in the
period the matter is resolved.
In the fourth quarter of fiscal 2006, we made $90 million
of tax-related adjustments to the purchase accounting for
Veritas, consisting of $120 million of additional
pre-acquisition tax reserve-related adjustments, partially
offset by a $30 million reduction in other pre-acquisition
taxes payable. While we strongly disagree with the IRS over both
its transfer pricing methodologies and the amount of the
assessment, we have established additional tax reserves for all
Veritas pre-acquisition years to account for both contingent tax
and interest risk.
On March 30, 2006, we received notices of proposed
adjustment 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 Symantecs 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 the fourth quarter of fiscal 2006, we increased our tax
reserves by an additional $64 million in connection with
all open Symantec tax years (fiscal 2003 to 2006). Since these
reserves relate to licensing arising from acquired technology,
the additional accruals are primarily offset by deferred taxes.
48
We are as yet unable to confirm our eligibility to claim a lower
tax rate on a distribution made from a Veritas foreign
subsidiary prior to the acquisition. The distribution was
intended to be made pursuant to the Jobs Act, and therefore
eligible for a 5.25% effective U.S. federal rate of tax, in
lieu of the 35% statutory rate. We are seeking a ruling from the
IRS on the matter. Because we were unable to obtain this ruling
prior to filing the Veritas tax return in May 2006, we have paid
$130 million of additional U.S. taxes. Since this
payment relates to the taxability of foreign earnings that are
otherwise the subject of the IRS assessment, this additional
payment reduced the amount of taxes payable accrued as part of
the purchase accounting for pre-acquisition contingent tax
risks. For further information, see Note 17 of the Notes to
Consolidated Financial Statements in this annual report and
Critical Accounting Estimates Income Taxes
above.
In connection with the note hedge transactions discussed in
Note 9 of the Notes to the 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 deferred tax asset has been
accounted for as an increase to Capital in excess of par value.
The Company adopted the provisions of FASB Interpretation
No. 48, 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 Retained Earnings balance, and a
$1 million increase in Capital in excess of par value. Upon
adoption, the gross liability for unrecognized tax benefits at
March 31, 2007 was $456 million, exclusive of interest
and penalties.
LIQUIDITY
AND CAPITAL RESOURCES
Sources
of Cash
We have historically relied primarily on cash flow 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 July 2006, 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 maintain availability 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 as defined as well as
various other non-financial covenants. As of March 28,
2008, we were in compliance with these covenants.
As of March 28, 2008, we had cash and cash equivalents of
$1.9 billion and short-term investments of
$537 million resulting in a net liquidity position (unused
availability of the credit facility, cash and cash equivalents
and short-term investments) of $3.2 billion.
We believe that our 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.
Uses of
Cash
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.
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. In April 2007,
we acquired the outstanding common stock of
49
Altiris, Inc. and paid $841 million, net of cash acquired,
which reflects $165 million of cash acquired and
$17 million of cash paid for transaction costs. In November
2007, we acquired Vontu, Inc. and paid $298 million, net of
cash acquired. We used $200 million borrowed under a
five-year, $1 billion senior unsecured revolving credit
facility to partially fund the purchase. In January 2008, we
acquired Transparent Logic Technologies, Inc., and paid
$12 million in cash. During fiscal 2007, we paid cash of
$33 million for the acquisitions of other businesses.
During fiscal 2006, we had net sales of available-for-sale
securities of $3.4 billion and cash of $541 million
acquired through the acquisition of Veritas, net of cash
expenditures for our other acquisitions in fiscal 2006. In
connection with the Veritas acquisition, we assumed
Veritas 0.25% Convertible Subordinated Notes, or the
Veritas 0.25% Notes, with a principal amount of
$520 million due August 1, 2013, and a short-term loan
with a principal amount of euros 411 million, which was
paid in its entirety in fiscal 2006. In August 2006, we
repurchased all $520 million of the Veritas
0.25% notes with cash, which reflected principal plus
interest.
Stock Repurchases. During fiscal 2008, we
repurchased a total of 81 million shares, or
$1.5 billion, of our Companys common stock. At
March 28, 2008 we have $1 billion remaining under the
plan authorized by the Board of Directors in June 2007.
Issuance of Convertible Senior Notes. In June
2006, we issued $1.1 billion principal amount of
0.75% Convertible Senior Notes (Senior Notes)
due June 15, 2011, and $1.0 billion principal amount
of 1.00% Convertible 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 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.
The following table provides information about our significant
contractual obligations and commitments as of March 28,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
|
Fiscal 2012
|
|
|
Fiscal 2014
|
|
|
|
|
|
|
Total
|
|
|
Fiscal 2009
|
|
|
and 2011
|
|
|
and 2013
|
|
|
and thereafter
|
|
|
Other
|
|
|
|
(In thousands)
|
|
|
Convertible senior
notes(1)
|
|
$
|
2,100,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,100,000
|
|
|
$
|
1,000,000
|
|
|
$
|
|
|
Purchase
obligations(2)
|
|
|
366,911
|
|
|
|
308,665
|
|
|
|
58,118
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
Operating
leases(3)
|
|
|
520,752
|
|
|
|
102,799
|
|
|
|
153,156
|
|
|
|
100,785
|
|
|
|
164,012
|
|
|
|
|
|
Norton royalty
agreement(4)
|
|
|
17,854
|
|
|
|
7,023
|
|
|
|
8,792
|
|
|
|
1,642
|
|
|
|
397
|
|
|
|
|
|
Uncertain tax
positions(5)
|
|
|
479,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
479,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
3,485,260
|
|
|
$
|
418,487
|
|
|
$
|
220,066
|
|
|
$
|
1,202,555
|
|
|
$
|
1,164,409
|
|
|
$
|
479,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Senior Notes are due in fiscal 2012 and 2014. Holders of the
Senior Notes 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 our 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. As of March 28,
2008, the conditions to conversion had not been met. |
|
(2) |
|
The amounts are associated with agreements that are enforceable,
legally binding, and specify terms. |
|
(3) |
|
Operating lease obligations include $13 million related to
exited or excess facility costs related to restructuring
activities. |
|
(4) |
|
In June 2007, the Company amended an existing royalty agreement
with Peter Norton for the licensing of certain publicity rights.
As a result, the Company recorded a long-term liability
reflecting the net present value of expected future royalty
payments due to Mr. Norton. |
|
(5) |
|
At March 28, 2008, we reflected $480 million in long
term taxes payable related to uncertain tax benefits. At this
time, we are unable to make a reasonably reliable estimate of
the timing of payments in individual years beyond the next
twelve months due to uncertainties in the timing of the
commencement and settlement of potential tax audits and
controversies. |
50
Cash
Flows
The following table summarizes, for the periods indicated,
selected items in our Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Net cash provided by (used for)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
1,818,653
|
|
|
$
|
1,666,235
|
|
|
$
|
1,536,896
|
|
Investing activities
|
|
|
(1,526,218
|
)
|
|
|
(222,455
|
)
|
|
|
3,619,605
|
|
Financing activities
|
|
|
(1,065,553
|
)
|
|
|
(1,309,567
|
)
|
|
|
(3,910,064
|
)
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
104,309
|
|
|
|
109,199
|
|
|
|
(22,248
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
$
|
(668,809
|
)
|
|
$
|
243,412
|
|
|
$
|
1,224,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
Net cash provided by operating activities during fiscal 2008
resulted largely from net income of $464 million, plus
non-cash depreciation and amortization charges of
$824 million, non-cash stock-based compensation expense of
$164 million, income taxes payable of $197 million and
an increase in deferred revenue of $127 million. These
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, plus
non-cash depreciation and amortization charges of
$811 million, non-cash stock-based compensation expense of
$154 million, and an increase in deferred revenue of
$400 million. These amounts were partially offset by a
decrease in income taxes payable of $182 million, primarily
due to the timing of tax payments.
Investing
Activities
Fiscal 2008 Compared to Fiscal 2007: Cash used
for investing activities was $1.5 billion for 2008 compared
to $222 million for 2007. Cash used in fiscal 2008
primarily related to an aggregate payment of $1.2 billion
in cash for acquisitions which included Altiris for
$841 million and Vontu for $298 million and the joint
venture with Huawei Technologies Co., Ltd. for
$150 million. During fiscal 2007, we paid $33 million
for acquisitions of other businesses. Cash used in fiscal 2007
primarily related to the net increase in property and equipment
partially offset by the net purchase of short-term investments.
Both periods reflect consistent levels of capital purchasing
partially offset by proceeds from the sale of exited or excess
facilities.
Fiscal 2007 Compared to Fiscal 2006: Cash used
in investing activities was $222 million in fiscal 2007
compared to cash provided by investing activities of
$3.6 billion for 2006. Cash used in fiscal 2007 for the
acquisition of other businesses was $33 million compared to
cash provided by investing activities of $541 million
acquired through the acquisition of Veritas, net of cash
expenditures for our other acquisitions in fiscal 2006.
Additionally, we recognized net proceeds from sales of
available-for-sale securities of $3.4 billion during fiscal
2006, which was primarily associated with the liquidation of
assets assumed in the acquisition of Veritas.
Financing
Activities
Fiscal 2008 Compared to Fiscal 2007: Cash used
in financing was $1.1 billion in fiscal 2008 compared to
$1.3 billion in 2007. Cash used in fiscal 2008 primarily
related to the repurchase of 81 million shares of our
common stock for $1.5 billion which was partially offset by
the net proceeds of $224 million received from the issuance
of our common stock through employee stock plans and the
$200 million borrowed under the senior unsecured revolving
credit facility to finance the Vontu acquisition. Cash used in
fiscal 2007 primarily related to the repurchase of
162 million shares of our common stock for
$2.8 billion whereby $1.5 billion was funded by the
proceeds from the issuance of Senior Notes for
$2.1 billion. Also during fiscal 2007, we purchased hedges
related to the Senior Notes for $592 million and paid
$520 million for the repurchase of Veritas
0.25% Convertible
51
Subordinated Notes, or the 0.25% Notes assumed in the
Veritas acquisition; these amounts were partially offset by
$326 million received from the sale of common stock
warrants and $230 million received from the issuance of our
common stock through employee stock plans.
Fiscal 2007 Compared to Fiscal 2006: During
fiscal 2006, we repurchased 174 million shares of our
common stock for $3.6 billion and repaid the entire balance
of $491 million from a short-term loan assumed in the
Veritas acquisition, partially offset by $210 million in
proceeds from the issuance of our common stock through employee
stock plans.
Purchase
price adjustment
As a result of Company-i meeting target billings conditions in
the first quarter of fiscal 2008, as was stipulated in the
Company-i merger agreement, we paid the former shareholders of
Company-i an additional $11 million in cash. This increase
in purchase price resulted in a respective increase in goodwill.
Convertible
senior notes
Holders of the Senior Notes 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.
As of March 28, 2008, the conditions to convertibility of
the Senior Notes had not been met.
Royalties
We have certain royalty commitments associated with the shipment
and licensing of certain products. Royalty expense is generally
based on a dollar amount per unit shipped or a percentage of
underlying revenue. Certain royalty commitments have minimum
commitment obligations; however, as of March 28, 2008 all
such obligations are insignificant.
Indemnification
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.
Newly
Adopted and Recently Issued Accounting Pronouncements
Recent
accounting pronouncements
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
SECs 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 Staff Position
(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
Statement of Financial
52
Accounting Standard (SFAS) No. 142, Goodwill
and Other Intangible Assets. 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 March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133.
SFAS No. 161 requires disclosures of how and why an
entity uses derivative instruments, how derivative instruments
and related hedged items are accounted for and how derivative
instruments and related hedged items affect an entitys
financial position, financial performance, and cash flows.
SFAS No. 161 is effective for fiscal years beginning
after November 15, 2008, with early adoption permitted. We
are currently evaluating the impact of the pending adoption of
SFAS No. 161 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 the 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 parents 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
(revised R), Business Combinations. 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 acquisition date, and the recognition of changes in the
acquirers 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 first quarter of 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. See Note 17 of the Notes to the
Consolidated Financial Statements for further details.
In August 2007, the FASB issued proposed FASB FSP
No. APB
14-a,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). The proposed FSP would 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 would be recognized at the present
value of its cash flows discounted using the issuers
nonconvertible debt borrowing rate at the time of issuance. The
equity component would be recognized as the difference between
the proceeds from the issuance of the note and the fair value of
the liability. The proposed FSP would also require an accretion
of the resultant debt discount over the expected life of the
debt. The proposed transition guidance requires retrospective
application to all periods presented, and does not grandfather
existing instruments. In March 2008, the FASB approved moving
the proposed FSP to final guidance. The final guidance will be
effective for fiscal years beginning after December 15,
2008, and interim periods within those years. Entities will be
required to apply guidance retrospectively for all periods
presented. If the FSP is issued as proposed, we expect the
increase in non-cash interest expense recognized on our
consolidated financial statements to be significant.
53
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. We are currently in the
process of evaluating the impact of SFAS No. 159 on
our consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157
establishes a framework for measuring the fair value of assets
and liabilities. This framework is intended to provide increased
consistency in how fair value determinations are made under
various existing accounting standards which permit, or in some
cases require, estimates of fair market value.
SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those
fiscal years. In February 2008, the FASB issued FSP
No. FAS 157-1,
Application of SFAS No. 157 to SFAS No. 13
and Other Accounting Pronouncements That Address Fair Value
Measurements for Purposes of Lease Classification or Measurement
under SFAS No. 13 and FSP
No. FAS 157-2,
Effective Date of SFAS No. 157. Collectively, the
Staff Positions defer the effective date of
SFAS No. 157 to fiscal years beginning after
December 15, 2008, for nonfinancial assets and nonfinancial
liabilities except for items that are recognized or disclosed at
fair value on a recurring basis at least annually, and amend the
scope of SFAS 157. We are currently evaluating the impact
of the pending adoption of SFAS 157 on our consolidated
financial statements.
In September 2006, the FASB issued Emerging Issues Task Force
(EITF) Issue
No. 06-1,
Accounting for Consideration Given by a Service Provider to a
Manufacturer or Reseller of Equipment Necessary for an
End-Customer to Receive Service from the Service Provider.
EITF Issue
No. 06-1
requires that we provide disclosures regarding the nature of
arrangements in which we provide consideration to manufacturers
or resellers of equipment necessary for an end-customer to
receive service from us, including the amounts recognized in the
Consolidated Statements of Income. EITF Issue
No. 06-1
is effective for fiscal years beginning after June 15,
2007. We do not expect the adoption of EITF Issue
No. 06-1
to have a material impact on our consolidated financial
statements.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
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.
Interest
Rate Risk
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 the cash requirements of the company,
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
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 (expense), net in the Consolidated
Statements of Income. We use the specific identification method
to determine cost in calculating realized gains and losses upon
sale of short-term investments.
54
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Securities
|
|
|
Value of Securities Given an
|
|
|
|
Given an Interest
|
|
|
Interest Rate Increase of
|
|
|
|
Rate Decrease of X
|
|
|
X Basis Points (bps)
|
|
Fair Value
|
|
Basis Points (bps)
|
|
|
150 bps
|
|
100 bps
|
|
50 bps
|
|
As of
|
|
(25 bps)
|
|
(75 bps)
|
|
March 28, 2008
|
|
$
|
1,301
|
|
|
$
|
1,302
|
|
|
$
|
1,304
|
|
|
$
|
1,305
|
|
|
$
|
1,305
|
|
|
$
|
1,306
|
|
March 30, 2007
|
|
$
|
1,770
|
|
|
$
|
1,772
|
|
|
$
|
1,775
|
|
|
$
|
1,778
|
|
|
$
|
1,779
|
|
|
$
|
1,782
|
|
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.
Foreign
Currency Exchange Rate Risk
We conduct business in 36 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 (expense), 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 35 days or less. At the end of the
reporting period, open contracts are marked-to-market with
unrealized gains and losses included in Other income (expense),
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Given X%
|
|
|
|
|
|
Value of Contracts
|
|
|
|
Appreciation of
|
|
|
|
|
|
Given X% Depreciation of
|
|
|
|
Foreign Currency
|
|
|
Notional
|
|
|
Foreign Currency
|
|
Foreign Forward Exchange Contracts
|
|
10%
|
|
|
5%
|
|
|
Amount
|
|
|
(5)%
|
|
|
(10)%
|
|
|
Purchased, March 28, 2008
|
|
$
|
196
|
|
|
$
|
189
|
|
|
$
|
180
|
|
|
$
|
171
|
|
|
$
|
160
|
|
Sold, March 28, 2008
|
|
$
|
352
|
|
|
$
|
369
|
|
|
$
|
387
|
|
|
$
|
407
|
|
|
$
|
430
|
|
Purchased, March 30, 2007
|
|
$
|
176
|
|
|
$
|
169
|
|
|
$
|
161
|
|
|
$
|
153
|
|
|
$
|
143
|
|
Sold, March 30, 2007
|
|
$
|
258
|
|
|
$
|
270
|
|
|
$
|
284
|
|
|
$
|
299
|
|
|
$
|
316
|
|
Equity
Price Risk
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.
55
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 March 28, 2008, these investments had an
aggregate carrying value of $6 million.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Annual
Financial Statements
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
We have a 52/53-week fiscal accounting year. Accordingly, we
have presented quarterly fiscal periods, each comprised of
13 weeks, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
Fiscal 2007
|
|
|
|
Mar. 28,
|
|
|
Dec. 28,
|
|
|
Sep. 28,
|
|
|
Jun. 29,
|
|
|
Mar. 30,
|
|
|
Dec. 29,
|
|
|
Sep. 29,
|
|
|
Jun. 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2006(c)
|
|
|
2006(c)
|
|
|
2006(c)
|
|
|
|
(In thousands, except earnings per share)
|
|
|
Net revenues
|
|
$
|
1,539,741
|
|
|
$
|
1,515,251
|
|
|
$
|
1,419,089
|
|
|
$
|
1,400,338
|
|
|
$
|
1,357,217
|
|
|
$
|
1,315,873
|
|
|
$
|
1,260,408
|
|
|
$
|
1,265,868
|
|
Gross profit
|
|
|
1,233,362
|
|
|
|
1 ,216,090
|
|
|
|
1,114,563
|
|
|
|
1,090,074
|
|
|
|
1,050,954
|
|
|
|
1,005,370
|
|
|
|
960,007
|
|
|
|
967,209
|
|
Restructuring(a)
|
|
|
22,031
|
|
|
|
23,305
|
|
|
|
9,578
|
|
|
|
19,000
|
|
|
|
50,758
|
|
|
|
|
|
|
|
6,220
|
|
|
|
13,258
|
|
Loss on sale of a
business(b)
|
|
|
1,928
|
|
|
|
6,142
|
|
|
|
86,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
213,421
|
|
|
|
195,774
|
|
|
|
58,889
|
|
|
|
134,196
|
|
|
|
76,241
|
|
|
|
159,038
|
|
|
|
140,391
|
|
|
|
144,072
|
|
Net income
|
|
|
186,386
|
|
|
|
131,890
|
|
|
|
50,368
|
|
|
|
95,206
|
|
|
|
60,895
|
|
|
|
116,769
|
|
|
|
126,181
|
|
|
|
100,535
|
|
Earnings per share basic
|
|
$
|
0.22
|
|
|
$
|
0.15
|
|
|
$
|
0.06
|
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.13
|
|
|
$
|
0.13
|
|
|
$
|
0.10
|
|
Earnings per share diluted
|
|
$
|
0.22
|
|
|
$
|
0.15
|
|
|
$
|
0.06
|
|
|
$
|
0.10
|
|
|
$
|
0.07
|
|
|
$
|
0.12
|
|
|
$
|
0.13
|
|
|
$
|
0.10
|
|
|
|
|
(a) |
|
During the third and fourth quarter of fiscal 2008,
restructuring costs of $45 million were primarily related
to the fiscal 2008 restructuring plans. The remaining
$29 million of restructuring costs were primarily related
to severance, associated benefits, outplacement services, and
termination of excess facilities for the fiscal 2007 plans as
well as acquisition related restructuring. See Note 16 of
the Notes to Consolidated Financial Statements in this annual
report. |
|
(b) |
|
During the second quarter of fiscal 2008, management determined
that certain tangible and intangible assets and liabilities of
the Storage and Server Management segment (formally the Data
Center Management segment) did not meet the long term strategic
objectives of the segment, and we recorded a write-down of
$87 million to value these assets and liabilities at the
respective estimated fair value. We adjusted this amount during
the third and fourth quarter of fiscal 2008 by $6 million
and $2 million, respectively. On March 8, 2008 these
assets were sold to a third party. See Note 6 of the Notes
to Consolidated Financial Statements in this annual report. |
|
(c) |
|
The amounts for the first three quarters of fiscal 2007 reflect
adjustments as a result of the adoption of SAB 108 in the
fourth quarter of fiscal 2007. |
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
Not applicable.
56
|
|
Item 9A.
|
Controls
and Procedures
|
|
|
(a)
|
Evaluation
of Disclosure Controls and Procedures
|
The SEC defines the term disclosure controls and
procedures to mean a companys 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 SECs
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 issuers 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 Securities Exchange Act of 1934, as amended) 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.
|
|
(b)
|
Managements
Report on Internal Control over Financial
Reporting
|
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 Securities Exchange Act of 1934, as amended) 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 March 28, 2008, based on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
Our management has concluded that, as of March 28, 2008,
our internal control over financial reporting was effective
based on these criteria.
The Companys independent registered public accounting firm
has issued an attestation report regarding its assessment of the
Companys internal control over financial reporting as of
March 28, 2008, which appears on page 66.
|
|
(c)
|
Changes
in Internal Control over Financial Reporting
|
There were no changes in our internal control over financial
reporting during the quarter ended March 28, 2008 that have
materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
|
|
(d)
|
Limitations
on Effectiveness of Controls
|
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.
|
|
Item 9B.
|
Other
Information
|
None
57
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The information required by this item is incorporated by
reference to Symantecs Proxy Statement for its 2008 Annual
Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended
March 28, 2008.
|
|
Item 11.
|
Executive
Compensation
|
The information required by this item is incorporated by
reference to Symantecs Proxy Statement for its 2008 Annual
Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended
March 28, 2008.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this item is incorporated by
reference to Symantecs Proxy Statement for its 2008 Annual
Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended
March 28, 2008.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by this item is incorporated by
reference to Symantecs Proxy Statement for its 2008 Annual
Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended
March 28, 2008.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this item is incorporated by
reference to Symantecs Proxy Statement for its 2008 Annual
Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended
March 28, 2008.
58
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
Upon written request, we will provide, without charge, a copy of
this annual report, including the consolidated financial
statements and financial statement schedule. All requests should
be sent to:
Symantec Corporation
Attn: Investor Relations
20330 Stevens Creek Boulevard
Cupertino, California 95014
408-517-8000
a) The following documents are filed as part of this report:
|
|
|
|
|
|
|
Page
|
|
|
Number
|
|
1. Consolidated Financial Statements:
|
|
|
|
|
Reports of Independent Registered Public Accounting Firm
|
|
|
65
|
|
Consolidated Balance Sheets as of March 28, 2008 and
March 30, 2007
|
|
|
67
|
|
Consolidated Statements of Income for the years ended
March 28, 2008, March 30, 2007, and March 31, 2006
|
|
|
68
|
|
Consolidated Statements of Stockholders Equity and
Comprehensive Income for the years ended March 28, 2008,
March 30, 2007, and March 31, 2006
|
|
|
69
|
|
Consolidated Statements of Cash Flows for the years ended
March 28, 2008, March 30, 2007, and March 31, 2006
|
|
|
70
|
|
Notes to Consolidated Financial Statements
|
|
|
71
|
|
2. Financial Statement Schedule: The following financial
statement schedule of Symantec Corporation for the years ended
March 28, 2008, March 30, 2007, and March 31,
2006 is filed as part of this
Form 10-K
and should be read in conjunction with the consolidated
financial statements of Symantec Corporation
|
|
|
|
|
Schedule: II Valuation and Qualifying Accounts
|
|
|
113
|
|
Schedules other than that listed above have been omitted since
they are either not required, not applicable, or the information
is otherwise included.
|
|
|
|
|
59
Exhibits: The following exhibits are filed as
part of or furnished with this annual report as applicable:
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Herewith
|
|
|
2
|
.01§
|
|
Agreement and Plan of Reorganization dated as of
December 15, 2004 among Symantec Corporation, Carmel
Acquisition Corp., and Veritas Software Corporation
|
|
8-K
|
|
000-17781
|
|
2.01
|
|
12/20/04
|
|
|
|
2
|
.02§
|
|
Agreement and Plan of Merger among Symantec Corporation, Atlas
Merger Corp. and Altiris, Inc. dated January 26, 2007
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
01/29/07
|
|
|
|
3
|
.01
|
|
Amended and Restated Certificate of Incorporation of Symantec
Corporation
|
|
S-8
|
|
333-119872
|
|
4.01
|
|
10/21/04
|
|
|
|
3
|
.02
|
|
Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Symantec Corporation
|
|
S-8
|
|
333-126403
|
|
4.03
|
|
07/06/05
|
|
|
|
3
|
.03
|
|
Certificate of Designations of Series A Junior
Participating Preferred Stock of Symantec Corporation
|
|
8-K
|
|
000-17781
|
|
3.01
|
|
12/21/04
|
|
|
|
3
|
.04
|
|
Bylaws of Symantec Corporation
|
|
8-K
|
|
000-17781
|
|
3.01
|
|
01/23/06
|
|
|
|
4
|
.01
|
|
Form of Common Stock Certificate
|
|
S-3ASR
|
|
333-139230
|
|
4.07
|
|
12/11/06
|
|
|
|
4
|
.02
|
|
Rights Agreement, dated as of August 12, 1998, between
Symantec Corporation and BankBoston, N.A., as Rights Agent,
which includes as Exhibit A, the Form of Certificate of
Designations of Series A Junior Participating Preferred
Stock, as Exhibit B, the Form of Right Certificate, and as
Exhibit C, the Summary of Rights to Purchase Preferred
Shares
|
|
8-A
|
|
000-17781
|
|
4.1
|
|
08/19/98
|
|
|
|
4
|
.03
|
|
Indenture related to the 0.75% Convertible Senior Notes,
due 2011, dated as of June 16, 2006, between Symantec
Corporation and U.S. Bank National Association, as trustee
(including form of 0.75% Convertible Senior Notes due 2011)
|
|
8-K
|
|
000-17781
|
|
4.01
|
|
06/16/06
|
|
|
|
4
|
.04
|
|
Indenture related to the 1.00% Convertible Senior Notes,
due 2013, dated as of June 16, 2006, between Symantec
Corporation and U.S. Bank National Association, as trustee
(including form of 1.00% Convertible Senior Notes due 2013)
|
|
8-K
|
|
000-17781
|
|
4.02
|
|
06/16/06
|
|
|
|
4
|
.05
|
|
Registration Rights Agreement, dated as of June 16, 2006,
among Symantec Corporation and Citigroup Global Markets, Inc.,
Morgan Stanley & Co. Incorporated and UBS Securities
LLC, for themselves and the other Initial Purchasers
|
|
8-K
|
|
000-17781
|
|
4.03
|
|
06/16/06
|
|
|
|
4
|
.06
|
|
Form of Master Terms and Conditions For Convertible Bond Hedging
Transactions between Symantec Corporation and each of Bank of
America, N.A. and Citibank, N.A., respectively, dated
June 9, 2006, including Exhibit and Schedule thereto
|
|
10-Q
|
|
000-17781
|
|
10.04
|
|
08/09/06
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Herewith
|
|
|
4
|
.07
|
|
Form of Master Terms and Conditions For Warrants Issued by
Symantec Corporation between Symantec Corporation and each of
Bank of America, N.A. and Citibank, N.A., respectively, dated
June 9, 2006, including Exhibit and Schedule thereto
|
|
10-Q
|
|
000-17781
|
|
10.05
|
|
08/09/06
|
|
|
|
4
|
.08
|
|
Credit Agreement, dated as of July 12, 2006, by and among
Symantec Corporation, the lenders party thereto (the
Lenders), JPMorgan Chase Bank, National Association,
as Administrative Agent, Citicorp USA, Inc., as Syndication
Agent, Bank of America, N.A., Morgan Stanley Bank and UBS Loan
Finance LLC, as Co-Documentation Agents, and J.P. Morgan
Securities Inc. and Citigroup Global Markets Inc., as Joint
Bookrunners and Joint Lead Arrangers, and related agreements.
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
12/03/07
|
|
|
|
10
|
.01*
|
|
Form of Indemnification Agreement with Officers and Directors,
as amended (form for agreements entered into prior to
January 17, 2006)
|
|
S-1
|
|
33-28655
|
|
10.17
|
|
06/21/89
|
|
|
|
10
|
.02*
|
|
Form of Indemnification Agreement for Officers, Directors and
Key Employees
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
01/23/06
|
|
|
|
10
|
.03*
|
|
Veritas Software Corporation 1993 Equity Incentive Plan,
including form of Stock Option Agreement
|
|
10-K
|
|
000-17781
|
|
10.03
|
|
06/09/06
|
|
|
|
10
|
.04*
|
|
Veritas Software Corporation 1993 Directors Stock Option
Plan, including form of Stock Option Agreement
|
|
10-K
|
|
000-17781
|
|
10.04
|
|
06/09/06
|
|
|
|
10
|
.05*
|
|
Symantec Corporation 1996 Equity Incentive Plan, as amended,
including form of Stock Option Agreement and form of Restricted
Stock Purchase Agreement
|
|
10-K
|
|
000-17781
|
|
10.05
|
|
06/09/06
|
|
|
|
10
|
.06*
|
|
Symantec Corporation Deferred Compensation Plan, as adopted
November 7, 1996
|
|
10-K
|
|
000-17781
|
|
10.11
|
|
06/24/97
|
|
|
|
10
|
.07*
|
|
Symantec Corporation 1998 Employee Stock Purchase Plan, as
amended
|
|
10-K
|
|
000-17781
|
|
10.07
|
|
06/09/06
|
|
|
|
10
|
.08*
|
|
Brightmail Inc. 1998 Stock Option Plan, including form of Stock
Option Agreement and form of Notice of Assumption
|
|
10-K
|
|
000-17781
|
|
10.08
|
|
06/09/06
|
|
|
|
10
|
.09*
|
|
Altiris, Inc. 1998 Stock Option Plan
|
|
S-8
|
|
333-141986
|
|
99.01
|
|
04/10/07
|
|
|
|
10
|
.10*
|
|
Form of Notice of Grant of Stock Option under the Altiris, Inc.
1998 Stock Option Plan
|
|
S-8
|
|
333-141986
|
|
99.02
|
|
04/10/07
|
|
|
|
10
|
.11*
|
|
Symantec Corporation 2000 Director Equity Incentive Plan,
as amended
|
|
10-Q
|
|
000-17781
|
|
10.01
|
|
11/05/07
|
|
|
|
10
|
.12*
|
|
Symantec Corporation 2001 Non- Qualified Equity Incentive Plan
|
|
10-K
|
|
000-17781
|
|
10.12
|
|
06/09/06
|
|
|
|
10
|
.13*
|
|
Amended and Restated Symantec Corporation 2002 Executive
Officers Stock Purchase Plan
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
01/25/08
|
|
|
|
10
|
.14*
|
|
Veritas Software Corporation 2002 Directors Stock Option
Plan, including form of Stock Option Agreement and forms of
Notice of Stock Option Grant
|
|
10-K
|
|
000-17781
|
|
10.14
|
|
06/09/06
|
|
|
|
10
|
.15*
|
|
Altiris, Inc. 2002 Stock Plan
|
|
S-8
|
|
333-141986
|
|
99.03
|
|
04/10/07
|
|
|
|
10
|
.16*
|
|
Form of Stock Option Agreement under the Altiris, Inc. 2002
Stock Plan
|
|
S-8
|
|
333-141986
|
|
99.04
|
|
04/10/07
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Herewith
|
|
|
10
|
.17*
|
|
Vontu, Inc. 2002 Stock Option/Stock Issuance Plan, as amended
|
|
S-8
|
|
333-148107
|
|
99.02
|
|
12/17/07
|
|
|
|
10
|
.18*
|
|
Form of Vontu, Inc. Stock Option Agreement
|
|
S-8
|
|
333-148107
|
|
99.03
|
|
12/17/07
|
|
|
|
10
|
.19*
|
|
Veritas Software Corporation 2003 Stock Incentive Plan, as
amended and restated, including form of Stock Option Agreement,
form of Stock Option Agreement for Executives and Senior VPs and
form of Notice of Stock Option Assumption
|
|
10-K
|
|
000-17781
|
|
10.15
|
|
06/09/06
|
|
|
|
10
|
.20*
|
|
Symantec Corporation 2004 Equity Incentive Plan, as amended,
including Stock Option Grant Terms and Conditions,
form of RSU Award Agreement, and form of RSU Award Agreement for
Non-Employee Directors
|
|
10-K
|
|
000-17781
|
|
10.18
|
|
05/24/07
|
|
|
|
10
|
.21*
|
|
Altiris, Inc. 2005 Stock Plan
|
|
S-8
|
|
333-141986
|
|
99.05
|
|
04/10/07
|
|
|
|
10
|
.22*
|
|
Form of Incentive Stock Option Agreement under the Altiris, Inc.
2005 Stock Plan, as amended
|
|
S-8
|
|
333-141986
|
|
99.06
|
|
04/10/07
|
|
|
|
10
|
.23*
|
|
Offer Letter, dated February 8, 2006, from Symantec
Corporation to James A. Beer
|
|
10-K
|
|
000-17781
|
|
10.17
|
|
06/09/06
|
|
|
|
10
|
.24*
|
|
Separation and Release Agreement dated November 5, 2007 (as
amended on December 7, 2007), between Symantec Corporation
and Kristof Hagerman
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
12/14/07
|
|
|
|
10
|
.25*
|
|
Employment Agreement, dated December 15, 2004, between
Symantec Corporation and Kris Hagerman, as amended
|
|
S-4/A
|
|
333-122724
|
|
10.07
|
|
05/18/05
|
|
|
|
10
|
.26*
|
|
Offer Letter, dated January 12, 2004, from Symantec
Corporation to Thomas W. Kendra
|
|
10-Q
|
|
000-17781
|
|
10.01
|
|
02/04/05
|
|
|
|
10
|
.27*
|
|
Employment Agreement, dated April 11, 1999, between
Symantec Corporation and John W. Thompson
|
|
10-K
|
|
000-17781
|
|
10.67
|
|
07/01/99
|
|
|
|
10
|
.28*
|
|
FY08 Long Term Incentive Plan
|
|
10-Q
|
|
000-17781
|
|
10.04
|
|
08/07/07
|
|
|
|
10
|
.29*
|
|
Form of FY08 Executive Annual Incentive Plan Group
Presidents responsible for one of Symantecs business
segments
|
|
10-Q
|
|
000-17781
|
|
10.03
|
|
08/07/07
|
|
|
|
10
|
.30*
|
|
Form of FY08 Executive Annual Incentive Plan
Executive Officers other than Group Presidents responsible for
one of Symantecs business segments
|
|
8-K
|
|
000-17781
|
|
10.02
|
|
05/07/07
|
|
|
|
10
|
.31*
|
|
Symantec Senior Executive Incentive Plan
|
|
10-K
|
|
000-17781
|
|
10.18
|
|
06/14/04
|
|
|
|
10
|
.32*
|
|
Symantec Executive Retention Plan
|
|
10-Q
|
|
000-17781
|
|
10.05
|
|
08/07/07
|
|
|
|
10
|
.33
|
|
Second Amended and Restated Symantec Online Store Agreement, by
and among Symantec Corporation, Symantec Limited, Digital River,
Inc. and Digital River Ireland Limited, entered into on
October 19, 2006
|
|
10-Q
|
|
000-17781
|
|
10.02
|
|
02/07/07
|
|
|
|
10
|
.34
|
|
Amendment, dated June 20, 2007, to the Amended and Restated
Agreement Respecting Certain Rights of Publicity dated as of
August 31, 1990, by and between Peter Norton and Symantec
Corporation
|
|
10-Q
|
|
000-17781
|
|
10.01
|
|
08/07/07
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Herewith
|
|
|
10
|
.35
|
|
Assignment of Copyright and Other Intellectual Property Rights,
by and between Peter Norton and Peter Norton Computing, Inc.,
dated August 31, 1990
|
|
S-4
|
|
33-35385
|
|
10.37
|
|
06/13/90
|
|
|
|
10
|
.36
|
|
Environmental Indemnity Agreement, dated April 23, 1999,
between Veritas and Fairchild Semiconductor Corporation,
included as Exhibit C to that certain Agreement of Purchase
and Sale, dated March 29, 1999, between Veritas and
Fairchild Semiconductor of California
|
|
S-1/A
|
|
333-83777
|
|
10.27
Exhibit C
|
|
08/06/99
|
|
|
|
21
|
.01
|
|
Subsidiaries of Symantec Corporation
|
|
|
|
|
|
|
|
|
|
X
|
|
23
|
.01
|
|
Consent of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
X
|
|
24
|
.01
|
|
Power of Attorney (see Signature page to this annual report)
|
|
|
|
|
|
|
|
|
|
X
|
|
31
|
.01
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
|
31
|
.02
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
|
32
|
.01
|
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
|
32
|
.02
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
§ |
|
The exhibits and schedules to this agreement have been omitted
pursuant to Item 601(b)(2) of
Regulation S-K.
We will furnish copies of any of the exhibits and schedules to
the SEC upon request. |
|
* |
|
Indicates a management contract, compensatory plan or
arrangement. |
|
|
|
Certain portions of this exhibit have been omitted and have been
filed separately with the SEC pursuant to a request for
confidential treatment under Rule 24b-2 as promulgated under the
Securities Exchange Act of 1934. |
|
|
|
Filed by Veritas Software Corporation. |
|
|
|
This exhibit is being furnished, rather than filed, and shall
not be deemed incorporated by reference into any filing, in
accordance with Item 601 of
Regulation S-K. |
(c) Financial Statement Schedules: We hereby file, as part
of this annual report, the schedule listed in Item 15(a)2,
as set forth above.
63
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
Reports of Independent Registered Public Accounting Firm
|
|
|
65
|
|
Consolidated Balance Sheets as of March 28, 2008 and
March 30, 2007
|
|
|
67
|
|
Consolidated Statements of Income for the years ended
March 28, 2008, March 30, 2007, and March 31, 2006
|
|
|
68
|
|
Consolidated Statements of Stockholders Equity and
Comprehensive Income for the years ended March 28, 2008,
March 30, 2007, and March 31, 2006
|
|
|
69
|
|
Consolidated Statements of Cash Flows for the years ended
March 28, 2008, March 30, 2007, and March 31, 2006
|
|
|
70
|
|
Notes to Consolidated Financial Statements
|
|
|
71
|
|
64
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Symantec Corporation:
We have audited the accompanying consolidated balance sheets of
Symantec Corporation and subsidiaries (the Company) as of
March 28, 2008 and March 30, 2007, and the related
consolidated statements of income, stockholders equity and
comprehensive income, and cash flows for each of the years in
the three-year period ended March 28, 2008. In connection
with our audits of the consolidated financial statements we have
also audited the related financial statement schedule listed in
Item 15. These consolidated financial statements and
financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Symantec Corporation and subsidiaries as of
March 28, 2008 and March 30, 2007, and the results of
their operations and their cash flows for each of the years in
the three-year period ended March 28, 2008, in conformity
with U.S. generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial
statements, effective March 31, 2007, the Company adopted
the provisions of Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in
Income Taxes. Also discussed in Note 1, effective
April 1, 2006, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123(R),
Share-Based Payment.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
March 28, 2008, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated May 20, 2008
expressed an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting.
Mountain View, California
May 20, 2008
65
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Symantec Corporation:
We have audited Symantec Corporation and subsidiaries (the
Company) internal control over financial reporting as of
March 28, 2008, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Companys management is responsible
for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is
to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of March 28, 2008, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Symantec Corporation and
subsidiaries as of March 28, 2008 and March 30, 2007,
and the related consolidated statements of operations,
stockholders equity and comprehensive income, and cash
flows for each of the years in the three-year period ended
March 28, 2008, and our report dated May 20, 2008
expressed an unqualified opinion on those consolidated financial
statements.
Mountain View, California
May 20, 2008
66
SYMANTEC
CORPORATION
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except par value)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,890,225
|
|
|
$
|
2,559,034
|
|
Short-term investments
|
|
|
536,728
|
|
|
|
409,133
|
|
Trade accounts receivable, net
|
|
|
758,200
|
|
|
|
666,968
|
|
Inventories
|
|
|
34,138
|
|
|
|
42,183
|
|
Deferred income taxes
|
|
|
193,775
|
|
|
|
165,323
|
|
Other current assets
|
|
|
316,852
|
|
|
|
228,406
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3,729,918
|
|
|
|
4,071,047
|
|
Property and equipment, net
|
|
|
1,001,750
|
|
|
|
1,092,240
|
|
Acquired product rights, net
|
|
|
648,950
|
|
|
|
909,878
|
|
Other intangible assets, net
|
|
|
1,243,524
|
|
|
|
1,245,638
|
|
Goodwill
|
|
|
11,207,357
|
|
|
|
10,340,348
|
|
Investment in joint venture
|
|
|
150,000
|
|
|
|
|
|
Other long-term assets
|
|
|
55,291
|
|
|
|
63,987
|
|
Long-term deferred income taxes
|
|
|
55,304
|
|
|
|
27,732
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
18,092,094
|
|
|
$
|
17,750,870
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
169,631
|
|
|
$
|
149,131
|
|
Accrued compensation and benefits
|
|
|
431,345
|
|
|
|
307,824
|
|
Current deferred revenue
|
|
|
2,661,515
|
|
|
|
2,387,733
|
|
Other current liabilities
|
|
|
264,832
|
|
|
|
234,915
|
|
Income taxes payable
|
|
|
72,263
|
|
|
|
238,486
|
|
Short-term borrowing
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,799,586
|
|
|
|
3,318,089
|
|
Convertible senior notes
|
|
|
2,100,000
|
|
|
|
2,100,000
|
|
Long-term deferred revenue
|
|
|
415,054
|
|
|
|
366,050
|
|
Long-term deferred tax liabilities
|
|
|
219,341
|
|
|
|
343,848
|
|
Long-term income taxes payable
|
|
|
478,743
|
|
|
|
|
|
Other long-term obligations
|
|
|
106,187
|
|
|
|
21,370
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
7,118,911
|
|
|
|
6,149,357
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock (par value: $0.01, 1,000 shares authorized;
none issued and outstanding)
|
|
|
|
|
|
|
|
|
Common stock (par value: $0.01, 3,000,000 shares
authorized; 1,223,038 and 1,283,113 shares issued at
March 28, 2008 and March 30, 2007; 839,387 and
899,417 shares outstanding at March 28, 2008 and
March 30, 2007)
|
|
|
8,393
|
|
|
|
8,994
|
|
Capital in excess of par value
|
|
|
9,139,084
|
|
|
|
10,061,144
|
|
Accumulated other comprehensive income
|
|
|
159,792
|
|
|
|
182,933
|
|
Retained earnings
|
|
|
1,665,914
|
|
|
|
1,348,442
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
10,973,183
|
|
|
|
11,601,513
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
18,092,094
|
|
|
$
|
17,750,870
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
67
SYMANTEC
CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except net income per share)
|
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Content, subscriptions, and maintenance
|
|
$
|
4,561,566
|
|
|
$
|
3,917,572
|
|
|
$
|
2,873,211
|
|
Licenses
|
|
|
1,312,853
|
|
|
|
1,281,794
|
|
|
|
1,270,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
5,874,419
|
|
|
|
5,199,366
|
|
|
|
4,143,392
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Content, subscriptions, and maintenance
|
|
|
826,339
|
|
|
|
823,525
|
|
|
|
621,636
|
|
Licenses
|
|
|
44,664
|
|
|
|
49,968
|
|
|
|
45,943
|
|
Amortization of acquired product rights
|
|
|
349,327
|
|
|
|
342,333
|
|
|
|
314,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
1,220,330
|
|
|
|
1,215,826
|
|
|
|
981,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
4,654,089
|
|
|
|
3,983,540
|
|
|
|
3,161,523
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
2,415,264
|
|
|
|
2,007,651
|
|
|
|
1,499,904
|
|
Research and development
|
|
|
895,242
|
|
|
|
866,882
|
|
|
|
682,125
|
|
General and administrative
|
|
|
347,642
|
|
|
|
316,783
|
|
|
|
228,563
|
|
Amortization of other purchased intangible assets
|
|
|
225,131
|
|
|
|
201,502
|
|
|
|
148,822
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
|
|
|
|
285,100
|
|
Restructuring
|
|
|
73,914
|
|
|
|
70,236
|
|
|
|
24,918
|
|
Integration
|
|
|
|
|
|
|
744
|
|
|
|
15,926
|
|
Loss on sale of a business
|
|
|
94,616
|
|
|
|
|
|
|
|
|
|
Patent settlement
|
|
|
|
|
|
|
|
|
|
|
2,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
4,051,809
|
|
|
|
3,463,798
|
|
|
|
2,887,558
|
|
Operating income
|
|
|
602,280
|
|
|
|
519,742
|
|
|
|
273,965
|
|
Interest income
|
|
|
76,896
|
|
|
|
122,043
|
|
|
|
108,404
|
|
Interest expense
|
|
|
(29,480
|
)
|
|
|
(27,233
|
)
|
|
|
(17,996
|
)
|
Settlements of litigation, net
|
|
|
58,500
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
4,327
|
|
|
|
17,070
|
|
|
|
(1,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
712,523
|
|
|
|
631,622
|
|
|
|
362,723
|
|
Provision for income taxes
|
|
|
248,673
|
|
|
|
227,242
|
|
|
|
205,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
463,850
|
|
|
$
|
404,380
|
|
|
$
|
156,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$
|
0.53
|
|
|
$
|
0.42
|
|
|
$
|
0.16
|
|
Earnings per share diluted
|
|
$
|
0.52
|
|
|
$
|
0.41
|
|
|
$
|
0.15
|
|
Shares used to compute earnings per share basic
|
|
|
867,562
|
|
|
|
960,575
|
|
|
|
998,733
|
|
Shares used to compute earnings per share diluted
|
|
|
884,136
|
|
|
|
983,261
|
|
|
|
1,025,856
|
|
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
68
SYMANTEC
CORPORATION
AND COMPREHENSIVE INCOME AS OF MARCH 28, 2008, MARCH 30,
2007 AND MARCH 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in
|
|
|
Other
|
|
|
Deferred
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
Comprehensive
|
|
|
Stock-Based
|
|
|
Retained
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Par Value
|
|
|
Income
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
Balances, April 2, 2005
|
|
|
710,522
|
|
|
$
|
7,105
|
|
|
$
|
2,412,947
|
|
|
$
|
191,938
|
|
|
$
|
(21,070
|
)
|
|
$
|
1,114,533
|
|
|
$
|
3,705,453
|
|
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,852
|
|
|
|
156,852
|
|
Change in unrealized gain (loss) on available-for-sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,264
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,264
|
)
|
Translation adjustment, net of tax of $16,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,864
|
)
|
|
|
|
|
|
|
|
|
|
|
(40,864
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee stock plans
|
|
|
21,010
|
|
|
|
210
|
|
|
|
217,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,458
|
|
Repurchases of common stock
|
|
|
(173,666
|
)
|
|
|
(1,737
|
)
|
|
|
(3,483,200
|
)
|
|
|
|
|
|
|
|
|
|
|
(143,228
|
)
|
|
|
(3,628,165
|
)
|
Grant of restricted stock units
|
|
|
|
|
|
|
|
|
|
|
3,388
|
|
|
|
|
|
|
|
(3,388
|
)
|
|
|
|
|
|
|
|
|
Stock issued for acquisition of Veritas
|
|
|
483,119
|
|
|
|
4,831
|
|
|
|
12,493,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,498,336
|
|
Fair value of assumed Veritas stock options and restricted stock
|
|
|
|
|
|
|
|
|
|
|
698,514
|
|
|
|
|
|
|
|
(63,092
|
)
|
|
|
|
|
|
|
635,422
|
|
Amortization of deferred stock-based compensation, net of actual
forfeitures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,712
|
|
|
|
|
|
|
|
37,712
|
|
Reduction of deferred stock-based compensation due to stock
option and restricted stock unit cancellations
|
|
|
(100
|
)
|
|
|
|
|
|
|
(6,243
|
)
|
|
|
|
|
|
|
6,243
|
|
|
|
|
|
|
|
|
|
Other stock transactions
|
|
|
|
|
|
|
|
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
386
|
|
Income tax benefit from employee stock transactions
|
|
|
|
|
|
|
|
|
|
|
90,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2006
|
|
|
1,040,885
|
|
|
|
10,409
|
|
|
|
12,426,690
|
|
|
|
146,810
|
|
|
|
(43,595
|
)
|
|
|
1,128,157
|
|
|
|
13,668,471
|
|
Cumulative effect of adjustments from the adoption of
SAB No. 108, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,788
|
)
|
|
|
(33,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted balances, March 31, 2006
|
|
|
1,040,885
|
|
|
|
10,409
|
|
|
|
12,426,690
|
|
|
|
146,810
|
|
|
|
(43,595
|
)
|
|
|
1,094,369
|
|
|
|
13,634,683
|
|
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
404,380
|
|
|
|
404,380
|
|
Change in unrealized gain (loss) on available-for-sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,093
|
|
|
|
|
|
|
|
|
|
|
|
4,093
|
|
Translation adjustment, net of tax of $14,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,030
|
|
|
|
|
|
|
|
|
|
|
|
32,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
440,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of deferred compensation due to SFAS No. 123R
|
|
|
|
|
|
|
|
|
|
|
(43,595
|
)
|
|
|
|
|
|
|
43,595
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee stock plans
|
|
|
20,172
|
|
|
|
201
|
|
|
|
221,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,091
|
|
Repurchases of common stock
|
|
|
(161,704
|
)
|
|
|
(1,617
|
)
|
|
|
(2,694,388
|
)
|
|
|
|
|
|
|
|
|
|
|
(150,307
|
)
|
|
|
(2,846,312
|
)
|
Restricted stock units released, net of taxes
|
|
|
64
|
|
|
|
1
|
|
|
|
(699
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(698
|
)
|
Stock-based compensation, net of estimated forfeitures
|
|
|
|
|
|
|
|
|
|
|
152,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152,272
|
|
Issuance of warrants
|
|
|
|
|
|
|
|
|
|
|
326,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
326,102
|
|
Purchase of bond hedge, net of tax
|
|
|
|
|
|
|
|
|
|
|
(359,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(359,546
|
)
|
Income tax benefit from employee stock transactions
|
|
|
|
|
|
|
|
|
|
|
32,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 30, 2007
|
|
|
899,417
|
|
|
|
8,994
|
|
|
|
10,061,144
|
|
|
|
182,933
|
|
|
|
|
|
|
|
1,348,442
|
|
|
|
11,601,513
|
|
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
463,850
|
|
|
|
463,850
|
|
Change in unrealized gain (loss) on available-for-sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
|
278
|
|
Translation adjustment, net of tax of $15,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,419
|
)
|
|
|
|
|
|
|
|
|
|
|
(23,419
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
440,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee stock plans
|
|
|
20,299
|
|
|
|
202
|
|
|
|
223,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223,478
|
|
Repurchases of common stock
|
|
|
(80,939
|
)
|
|
|
(809
|
)
|
|
|
(1,347,491
|
)
|
|
|
|
|
|
|
|
|
|
|
(151,696
|
)
|
|
|
(1,499,996
|
)
|
Restricted stock units released, net of taxes
|
|
|
593
|
|
|
|
6
|
|
|
|
(4,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,138
|
)
|
Stock-based compensation, net of estimated forfeitures
|
|
|
|
|
|
|
|
|
|
|
156,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,704
|
|
Acquisition PPA adjustment for options
|
|
|
|
|
|
|
|
|
|
|
31,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,522
|
|
Director Retainer Fee Stock Portion
|
|
|
17
|
|
|
|
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300
|
|
Income tax benefit from employee stock transactions
|
|
|
|
|
|
|
|
|
|
|
17,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,773
|
|
Cumulative effect of adjustments from the adoption of
FIN 48, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,318
|
|
|
|
5,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 28, 2008
|
|
|
839,387
|
|
|
$
|
8,393
|
|
|
$
|
9,139,084
|
|
|
$
|
159,792
|
|
|
$
|
|
|
|
$
|
1,665,914
|
|
|
$
|
10,973,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
69
SYMANTEC
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
463,850
|
|
|
$
|
404,380
|
|
|
$
|
156,852
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
824,109
|
|
|
|
811,443
|
|
|
|
639,816
|
|
Stock-based compensation expense
|
|
|
163,695
|
|
|
|
153,880
|
|
|
|
38,401
|
|
Impairment of equity investments
|
|
|
1,000
|
|
|
|
2,841
|
|
|
|
4,273
|
|
Write-down of assets
|
|
|
1,200
|
|
|
|
|
|
|
|
285,100
|
|
Deferred income taxes
|
|
|
(180,215
|
)
|
|
|
11,173
|
|
|
|
(202,677
|
)
|
Income tax benefit from the exercise of stock options
|
|
|
29,443
|
|
|
|
43,118
|
|
|
|
90,145
|
|
Excess income tax benefit from the exercise of stock options
|
|
|
(26,151
|
)
|
|
|
(25,539
|
)
|
|
|
|
|
Loss on sale of a business
|
|
|
94,616
|
|
|
|
|
|
|
|
|
|
Loss (gain) on sale of property and equipment
|
|
|
2,847
|
|
|
|
(19,937
|
)
|
|
|
|
|
Net (gain) on settlements of litigation
|
|
|
(58,500
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
(894
|
)
|
|
|
912
|
|
|
|
120
|
|
Net change in assets and liabilities, excluding effects of
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(7,002
|
)
|
|
|
33,714
|
|
|
|
(87,434
|
)
|
Inventories
|
|
|
10,791
|
|
|
|
10,324
|
|
|
|
(29,828
|
)
|
Accounts payable
|
|
|
667
|
|
|
|
(25,623
|
)
|
|
|
40,168
|
|
Accrued compensation and benefits
|
|
|
97,133
|
|
|
|
23,169
|
|
|
|
(22,229
|
)
|
Deferred revenue
|
|
|
126,716
|
|
|
|
399,517
|
|
|
|
683,226
|
|
Income taxes payable
|
|
|
196,567
|
|
|
|
(181,926
|
)
|
|
|
(25,997
|
)
|
Other assets
|
|
|
81,115
|
|
|
|
(23,332
|
)
|
|
|
(18,471
|
)
|
Other liabilities
|
|
|
(2,334
|
)
|
|
|
48,121
|
|
|
|
(14,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,818,653
|
|
|
|
1,666,235
|
|
|
|
1,536,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(273,807
|
)
|
|
|
(419,749
|
)
|
|
|
(267,217
|
)
|
Proceeds from sale of property and equipment
|
|
|
104,715
|
|
|
|
121,464
|
|
|
|
|
|
Purchase of intangible assets
|
|
|
|
|
|
|
(13,300
|
)
|
|
|
(7,204
|
)
|
Proceeds from sales of intangible assets
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
Cash acquired in (payments for) for business acquisitions, net
of cash and cash equivalents acquired
|
|
|
(1,162,455
|
)
|
|
|
(33,373
|
)
|
|
|
540,604
|
|
Investment in Joint Venture
|
|
|
(150,000
|
)
|
|
|
|
|
|
|
|
|
Purchase of equity investments
|
|
|
|
|
|
|
|
|
|
|
(2,694
|
)
|
Proceeds from sales of equity investments
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
Purchases of available-for-sale securities
|
|
|
(1,233,954
|
)
|
|
|
(226,905
|
)
|
|
|
(1,729,922
|
)
|
Proceeds from sales of available-for-sale securities
|
|
|
1,189,283
|
|
|
|
349,408
|
|
|
|
5,083,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(1,526,218
|
)
|
|
|
(222,455
|
)
|
|
|
3,619,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock warrants
|
|
|
|
|
|
|
326,102
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(1,499,995
|
)
|
|
|
(2,846,312
|
)
|
|
|
(3,628,165
|
)
|
Net proceeds from sales of common stock under employee stock
benefit plans
|
|
|
224,152
|
|
|
|
230,295
|
|
|
|
209,563
|
|
Proceeds from debt issuance
|
|
|
|
|
|
|
2,067,299
|
|
|
|
|
|
Purchase of bond hedge
|
|
|
|
|
|
|
(592,490
|
)
|
|
|
|
|
Proceeds from short-term borrowing
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
Excess income tax benefit from the exercise of stock options
|
|
|
26,151
|
|
|
|
25,539
|
|
|
|
|
|
Repayment of other long-term liability
|
|
|
(11,724
|
)
|
|
|
(520,000
|
)
|
|
|
(491,462
|
)
|
Tax payments related to restricted stock issuance
|
|
|
(4,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(1,065,553
|
)
|
|
|
(1,309,567
|
)
|
|
|
(3,910,064
|
)
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
104,309
|
|
|
|
109,199
|
|
|
|
(22,248
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(668,809
|
)
|
|
|
243,412
|
|
|
|
1,224,189
|
|
Beginning cash and cash equivalents
|
|
|
2,559,034
|
|
|
|
2,315,622
|
|
|
|
1,091,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents
|
|
$
|
1,890,225
|
|
|
$
|
2,559,034
|
|
|
|
2,315,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of options assumed, restricted stock awards and
restricted stock units in connection with acquisitions
|
|
$
|
35,054
|
|
|
$
|
|
|
|
|
13,196,850
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid (net of refunds) during the year
|
|
$
|
181,089
|
|
|
$
|
384,771
|
|
|
|
339,081
|
|
Interest expense paid during the year
|
|
$
|
22,659
|
|
|
$
|
10,108
|
|
|
|
1,748
|
|
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
70
SYMANTEC
CORPORATION
|
|
Note 1.
|
Summary
of Significant Accounting Policies
|
Business
Symantec Corporation (we, us, and
our refer to Symantec Corporation and all of its
subsidiaries) 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.
Principles
of Consolidation
The accompanying consolidated financial statements of Symantec
Corporation and its wholly-owned subsidiaries are prepared in
conformity with generally accepted accounting principles in the
United States. All significant intercompany accounts and
transactions have been eliminated.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the current presentation. As of March 30, 2007, we had
$16 million of deferred compensation plan assets that were
reclassified from Short term investments to Other current assets.
Business
Combinations
In fiscal 2008, we acquired Altiris Inc, a publicly-held
company, and two privately-held companies. In fiscal 2007, we
acquired two privately-held companies. Each of these was
accounted for using the purchase method of accounting under
SFAS No. 141 Business Combinations. Each
acquired companys operating results are included in the
Companys consolidated financial statements since the date
of acquisition. The purchase price is allocated to tangible and
identifiable intangible assets acquired and liabilities assumed
as of the date of acquisition. Goodwill is recognized for the
remaining unallocated purchase price.
Amounts allocated to assets are based upon fair values. Such
valuations require management to make significant estimates and
assumptions, especially with respect to intangible assets.
Management makes estimates of fair value based upon assumptions
believed to be reasonable. These estimates are based on
historical experience and information obtained from the
management of the acquired companies and are inherently
uncertain. Other separately identifiable intangible assets
generally include acquired product rights, developed technology,
customer lists and tradenames. The Company did not assume
in-process research and development (IPR&D) in
the fiscal years 2008 and 2007. Other intangible assets are
amortized over their estimated useful lives using a
straight-line method. Amortization for acquired product rights
is recognized in Cost of revenues. Amortization for
customer lists and tradenames is recognized in Operating
expenses.
Amounts allocated to liabilities assumed are based upon present
values of amounts to be paid determined at current market rates.
The Company estimates the fair value of deferred revenue related
to product support assumed in connection with acquisitions. The
estimated fair value of deferred revenue is determined by
estimating the costs related to fulfilling the obligations plus
a normal profit margin. The estimated costs to fulfill the
support contracts are based on the historical direct costs
related to providing the support.
For any given acquisition, we may identify certain
pre-acquisition contingencies. If the contingency is probable
and can be reasonably estimated within the purchase price
allocation period, generally within one year after acquisition,
an adjustment is recorded to goodwill. If the contingency is not
probable or cannot be reasonably estimated at the end of the
purchase price allocation period, the adjustment is recorded in
operating results in the period in which the adjustment is
determined.
71
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Fiscal
Years
We have a 52/53-week fiscal year ending on the Friday closest to
March 31. Unless otherwise stated, references to years in
this report relate to fiscal years rather than calendar years.
|
|
|
|
|
Fiscal Year
|
|
Ended
|
|
Weeks
|
|
2008
|
|
March 28, 2008
|
|
52
|
2007
|
|
March 30, 2007
|
|
52
|
2006
|
|
March 31, 2006
|
|
52
|
The fiscal year ending April 3, 2009 will comprise
53 weeks of operations.
Use of
Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Estimates are based
upon historical factors, current circumstances and the
experience and judgment of management. Management evaluates its
assumptions and estimates on an ongoing basis and may engage
outside subject matter experts to assist in its valuations.
Actual results could differ from those estimates. Significant
items subject to such estimates and assumptions include those
related to the allocation of revenues between recognized and
deferred amounts, carrying values of goodwill, intangible assets
and long-lived assets, valuation of stock-based compensation,
and the valuation allowance for deferred income taxes.
Foreign
Currency Translation
The functional currency of our foreign subsidiaries is generally
the local currency. Assets and liabilities denominated in
foreign currencies are translated using the exchange rate on the
balance sheet dates. Revenues and expenses are translated using
monthly average exchange rates prevailing during the year. The
translation adjustments resulting from this process are included
as a component of Stockholders equity in Accumulated other
comprehensive income. Foreign currency transaction gains and
losses are included in Other income (expense), net, in the
Consolidated Statements of Income. Deferred tax assets
(liabilities) are established on the cumulative translation
adjustment attributable to unremitted foreign earnings that are
not intended to be indefinitely reinvested.
Revenue
Recognition
We market and distribute our software products both as
stand-alone software products and as integrated product suites.
We recognize revenue when the following conditions have been met:
|
|
|
|
|
Persuasive evidence of an arrangement exists
|
|
|
|
Delivery has occurred or services have been rendered
|
|
|
|
Collection of a fixed or determinable amount is considered
probable
|
If we determine that any one of the three criteria is not met,
we will defer recognition of revenue until all the criteria are
met.
We derive revenue primarily from sales of content,
subscriptions, and maintenance and licenses. We present revenue
net of sales taxes and any similar assessments.
Content, subscriptions, and maintenance revenue includes
arrangements for software maintenance and technical support for
our products, content and subscription services primarily
related to our security products, revenue from arrangements
where vendor-specific objective evidence, or VSOE, of the fair
value of undelivered elements does not exist, and arrangements
for managed security services. These arrangements are generally
offered
72
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
to our customers over a specified period of time, and we
recognize the related revenue ratably over the maintenance,
subscription, or service period.
Content, subscriptions, and maintenance revenue also includes
professional services revenue, which consists primarily of the
fees we earn related to consulting and educational services. We
generally recognize revenue from professional services as the
services are performed or upon written acceptance from
customers, if applicable, assuming all other conditions for
revenue recognition noted above have been met.
License revenue is derived primarily from the licensing of our
various products and technology. We generally recognize license
revenue upon delivery of the product, assuming all other
conditions for revenue recognition noted above have been met.
We enter into perpetual software license agreements through
direct sales to customers and indirect sales with distributors
and resellers. The license agreements generally include product
maintenance agreements, for which the related revenue is
included with Content, subscriptions, and maintenance and is
deferred and recognized ratably over the period of the
agreements.
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 VSOE of
fair value of the undelivered elements, and recognize the
difference between the total arrangement fee and the amount
deferred for the undelivered items as license revenue. 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, the entire
arrangement fee is recognized ratably over the performance
period. Our deferred revenue consists primarily of the
unamortized balance of enterprise product maintenance, consumer
product content update subscriptions, and arrangements where
VSOE does not exist.
Indirect
channel sales
For our Consumer Products segment, we sell packaged software
products through a multi-tiered distribution channel. We also
sell electronic download and packaged products via the Internet.
We separately sell annual content update subscriptions directly
to end-users primarily via the Internet. For our consumer
products that include content updates, we recognize revenue for
these products ratably over the term of the subscription upon
sell-through to end-users. For most other consumer products, we
recognize package product revenue on distributor and reseller
channel inventory that is not in excess of specified inventory
levels in these channels. We offer the right of return of our
products under various policies and programs with our
distributors, resellers, and end-user customers. We estimate and
record reserves for product returns as an offset to revenue. We
fully reserve for obsolete products in the distribution channel
as an offset to deferred revenue.
For our Security and Compliance and Storage and Server
Management segments, we generally recognize revenue from the
licensing of software products through our indirect sales
channel upon sell-through or with evidence of an end-user. For
licensing of our software to OEMs, royalty revenue is recognized
when the OEM reports the sale of the software products to an
end-user, generally on a quarterly basis. In addition to license
royalties, some OEMs pay an annual flat fee
and/or
support royalties for the right to sell maintenance and
technical support to the end-user. We recognize revenue from OEM
support royalties and fees ratably over the term of the support
agreement.
We offer channel and end-user rebates for our products. 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 program, actual sales during
the promotion, amount of actual redemptions received, historical
redemption trends by product and by type of promotional program,
and
73
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
the value of the rebate. 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.
Cash
Equivalents and Short-Term Investments
We classify our cash equivalents and short-term investments in
accordance with Statement of Financial Accounting Standards, or
SFAS, No. 115, Accounting for Certain Investments in
Debt and Equity Securities. We consider investments in
instruments purchased with an original maturity of 90 days
or less to be cash equivalents. Our short-term investments
consist of marketable debt or equity securities with original
maturities in excess of 90 days and are classified as
available-for-sale. Our cash equivalents and short-term
investment portfolios consist primarily of money market funds,
commercial paper, and other investments. 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
(expense), net in the Consolidated Statements of Income. We use
the specific identification method to determine cost in
calculating realized gains and losses upon sale of short-term
investments.
Trade
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount
and are not interest bearing. We maintain an allowance for
doubtful accounts to reserve for potentially uncollectible trade
receivables. Additions to the allowance for doubtful accounts
are recorded as General and administrative expenses. We review
our trade receivables by aging category to identify specific
customers with known disputes or collectibility issues. In
addition, we maintain an allowance for all other receivables not
included in the specific reserve by applying specific
percentages of projected uncollectible receivables to the
various aging categories. In determining these percentages, we
analyze our historical collection experience and current
economic trends. We exercise judgment when determining the
adequacy of these reserves as we evaluate historical bad debt
trends, general economic conditions in the U.S. and
internationally, and changes in customer financial conditions.
We also offset deferred revenue against accounts receivable when
channel inventories are in excess of specified levels and for
transactions where collection of a receivable is not considered
probable.
Equity
Investments
We have equity investments in privately held companies for
business and strategic purposes. We account for non-marketable
equity securities and other investments under the cost method
or, if we have the ability to exert significant influence over
the investee, utilizing the equity method. Cost method
investments are included in Other long-term assets in the
Consolidated Balance Sheets. Under the cost method, the
investment is recorded at its initial cost and is periodically
evaluated for impairment. During our review for impairment, we
examine the investees actual and forecasted operating
results, financial position, and liquidity, as well as
business/industry factors in assessing whether a decline in
value of an equity investment has occurred that is
other-than-temporary. When such a decline in value is
identified, the fair value of the equity investment is estimated
based on the preceding factors and an impairment loss is
recognized in Other income (expense), net in the Consolidated
Statements of Income. In fiscal 2008, 2007, and 2006, we
recognized impairment losses on our cost method equity
investments of $1 million, $3 million, and
$4 million, respectively. We account for the
Huawei-Symantec joint venture under the equity method. This
investment is included in Investment in joint venture in the
Consolidated Balance Sheets. Under the equity method, we record
our proportionate share of the joint ventures net income
or loss, based on the quarterly financial statements of the
joint venture. See Note 5 for further details.
74
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Each quarter, we assess our compliance with accounting guidance,
including the provisions of Financial Accounting Standards Board
Interpretation No. 46R, or FIN 46R, Consolidation
of Variable Interest Entities An Interpretation of
ARB No. 51. Under FIN 46R, we must consolidate a
variable interest entity if we have a variable interest (or
combination of variable interests) in the entity that will
absorb a majority of the entitys expected losses, receive
a majority of the entitys expected residual returns, or
both. Currently, our equity investments are not subject to
consolidation under FIN 46R.
Derivative
Financial Instruments
We utilize hedging to mitigate our foreign currency exposures,
and we manage certain residual exposures through the use of
one-month forward foreign exchange contracts. We enter into
forward foreign exchange contracts with high-quality financial
institutions primarily to minimize currency exchange risks
associated with certain balance sheet positions denominated in
foreign currencies. We do not utilize derivative instruments for
trading or speculative purposes. Gains and losses on the
contracts are included in Other income (expense), net in the
Consolidated Statements of Income in the period that gains and
losses on the underlying maturing forward transactions are
recognized. The gains and losses on the contracts generally
offset the gains and losses on the underlying transactions.
Changes in the fair value of forward foreign exchange contracts
are included in earnings. We do not hedge our foreign currency
translation risk.
Inventories
Inventories are valued at the lower of cost or market. Cost is
principally determined using the
first-in,
first-out method. Inventory predominantly consists of finished
goods as well as deferred costs of revenue. Deferred costs of
revenue were $32 million at March 28, 2008 and
$40 million at March 30, 2007, of which
$22 million and $27 million, respectively, are related
to consumer products that include content updates and will be
recognized ratably over the term of the subscription.
Property
and Equipment
Property, equipment, and leasehold improvements are stated at
cost, net of accumulated depreciation and amortization.
Depreciation and amortization is provided on a straight-line
basis over the estimated useful lives of the respective assets
as follows:
|
|
|
|
|
Computer hardware and software two to five years
|
|
|
|
Office furniture and equipment three to five years
|
|
|
|
Leasehold improvements the shorter of the lease term
or seven years
|
|
|
|
Buildings twenty-five to thirty years
|
Acquired
Product Rights
Acquired product rights are comprised of purchased product
rights, technologies, databases, patents, and contracts from
acquired companies. Acquired product rights are stated at cost
less accumulated amortization. Amortization of acquired product
rights is provided on a straight-line basis over the estimated
useful lives of the respective assets, generally one to eight
years, and is included in Cost of revenues in the Consolidated
Statements of Income.
On an annual basis, we evaluate acquired product rights for
impairment by comparing the carrying value of the assets to the
net realizable value of the assets, in accordance with
SFAS No. 86. 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. As of
March 28, 2008 and March 30, 2007, we recorded no
impairment associated with this analysis.
75
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Goodwill
and Other Intangible Assets
We account for goodwill and other intangible assets in
accordance with SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 requires that
goodwill and identifiable intangible assets with indefinite
useful lives be tested for impairment at least annually, or more
frequently if events and circumstances warrant. We evaluate
goodwill for impairment by comparing the fair value of each of
our reporting units, which are the same as our operating
segments, to its carrying value, including the goodwill
allocated to that reporting unit. To determine the reporting
units fair values in the current year evaluation, we used
the income approach under which we calculated the fair value of
each reporting unit based on the estimated discounted future
cash flows of that unit. Our cash flow assumptions are based on
historical and forecasted revenue, operating costs, and other
relevant factors. SFAS No. 142 also requires that
intangible assets with finite useful lives be amortized over
their respective estimated useful lives and reviewed for
impairment in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets.
Long-Lived
Assets
We account for long-lived assets in accordance with
SFAS No. 144, which requires that long-lived and
intangible assets subject to amortization, including Property
and equipment, net, and Other intangible assets, net, be
evaluated for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. We would recognize an impairment loss if the
sum of the undiscounted future net 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, which would be estimated based on the discounted
cash flows expected to be generated by the asset. Assets to be
disposed of would be separately presented in the Consolidated
Balance Sheets, reported at the lower of the carrying amount or
fair value less costs to sell, and no longer depreciated. The
disposal group classified as held for sale would be presented in
the Other current assets account on the Consolidated Balance
Sheets.
Income
Taxes
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 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
Income. 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
76
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
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
Income, or to goodwill to the extent that the valuation
allowance related to tax attributes of the acquired entities.
We adopted the provisions of FASB Interpretation No. 48, or
FIN 48, Accounting for Uncertainty in Income Taxes,
effective March 31, 2007. FIN 48 clarifies the
accounting for income taxes, by prescribing a minimum
recognition threshold a tax position is required to meet 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.
FIN 48 prescribes a two-step process to determine the
amount of tax benefit to be recognized. The first step is to
evaluate the tax position for recognition by determining if the
weight of available evidence indicates that it is more likely
than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any.
The second step requires us to estimate and measure the tax
benefit as the largest amount that is more than 50% likely of
being realized upon ultimate settlement. It is inherently
difficult and subjective to estimate such amounts, as this
requires us to determine the probability of various possible
outcomes. We reevaluate these uncertain tax positions on a
quarterly basis. This evaluation is based on factors including,
but not limited to, changes in facts or circumstances, changes
in tax law, effectively settled issues under audit, and new
audit activity. Such a change in recognition or measurement
would result in the recognition of a tax benefit or an
additional charge to the tax provision in the period.
Earnings
Per Share
Earnings per share basic and diluted are presented
in conformity with SFAS No. 128, Earnings per
Share, for all periods presented. Earnings per share
basic is computed using the weighted-average number
of common shares outstanding during the periods. Earnings per
share diluted is computed using the weighted-average
number of common shares outstanding and potentially dilutive
common shares outstanding during the periods. Potentially
dilutive common shares include the assumed exercise of stock
options using the treasury stock method, the dilutive impact of
restricted stock, restricted stock units, and warrants using the
treasury stock method, and conversion of debt, if dilutive, in
the period.
Stock-Based
Compensation
Prior to April 1, 2006, we accounted for stock-based
compensation awards to employees using the intrinsic value
method in accordance with Accounting Principles Board Opinion,
or APB, No. 25, Accounting for Stock Issued to
Employees, and to non-employees using the fair value method
in accordance with SFAS No. 123, Accounting for
Stock-Based Compensation. In addition, we applied applicable
provisions of FIN 44, Accounting for Certain
Transactions Involving Stock Compensation, an interpretation
of APB No. 25.
Effective April 1, 2006, we adopted the provisions of
SFAS No. 123R, Share-Based Payment, which
replaced SFAS No. 123 and superseded APB No. 25
and related interpretations. Under SFAS No. 123R, we
must measure the fair value of all stock-based awards, including
stock options, restricted stock units, and employee stock
purchase plan purchase rights, on the date of grant and amortize
the fair value of the award as compensation expense over the
requisite service period. We elected the modified prospective
application method, under which prior periods are not revised
for comparative purposes. The valuation provisions of
SFAS No. 123R apply to new awards and to awards
outstanding as of the effective date that are subsequently
modified. For stock-based awards granted on or after
April 1, 2006, we recognize stock-based compensation
expense on a straight-line basis over the requisite service
period, which is generally the vesting period. We recognize
estimated compensation expense for stock-based awards that were
outstanding and unvested as of the effective date on a
straight-line basis over the remaining service period under the
pro forma provisions of SFAS No. 123.
77
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Prior to the adoption of SFAS No. 123R, we presented
all tax benefits for deductions related to stock options as
operating cash flows in our Consolidated Statements of Cash
Flows. SFAS No. 123R requires cash flows resulting
from the tax benefits for tax deductions, in excess of the
compensation expense recorded for exercised options, to be
classified as financing cash flows. Accordingly, we classified
$26 million in both years for such excess tax benefits as
financing cash flows rather than operating cash flows in our
Consolidated Statement of Cash Flows for the fiscal years ended
March 28, 2008 and March 30, 2007, respectively.
Pursuant to the income tax guidance included in
SFAS No. 123R, we have elected the regular method of
computing the pool of excess tax benefits, or APIC pool.
Concentrations
of Credit Risk
A significant portion of our revenues and net income is derived
from international sales and independent agents and
distributors. Fluctuations of the U.S. dollar against
foreign currencies, changes in local regulatory or economic
conditions, piracy, or nonperformance by independent agents or
distributors could adversely affect operating results.
Financial instruments that potentially subject us to
concentrations of credit risk consist principally of cash and
cash equivalents, short-term investments, trade accounts
receivable, and forward foreign exchange contracts. Our
investment portfolio is diversified and consists of investment
grade securities. Our investment policy limits the amount of
credit risk exposure to any one issuer and in any one country.
We are exposed to credit risks in the event of default by the
issuers to the extent of the amount recorded in the Consolidated
Balance Sheets. The credit risk in our trade accounts receivable
is substantially mitigated by our credit evaluation process,
reasonably short collection terms, and the geographical
dispersion of sales transactions. We maintain reserves for
potential credit losses and such losses have been within
managements expectations.
Legal
Expenses
Prior to October 1, 2006, we recognized a liability for
cases where we are the defendant for estimated external legal
costs to be incurred during the next fiscal quarter. Effective
October 1, 2006, we changed our policy related to legal
costs from one generally accepted method of accounting to
another generally accepted method of accounting. Under our new
policy, we will no longer recognize a liability for external
legal costs related to future periods. Instead, we will expense
such amounts in the period incurred. We believe that this new
policy is preferable because the costs and administrative burden
involved in estimating future legal expenses outweigh the
benefits. Further, we believe that this new method more
accurately aligns the expense with the accounting period in
which it is incurred. We will continue to accrue amounts related
to external legal costs that are incurred during the period and
to accrue losses in the period in which a loss is probable and
estimable. The impact of this change in accounting method is not
material for all prior periods presented, and, therefore, prior
periods have not been revised to reflect this change.
Accumulated
Other Comprehensive Income
We report comprehensive income or loss in accordance with the
provisions of SFAS No. 130, Reporting Comprehensive
Income, which establishes standards for reporting
comprehensive income and its components in the financial
statements. The components of other comprehensive income consist
of unrealized gains and losses on available-for-sale securities,
net of tax, and foreign currency translation adjustments, net of
tax. Unrealized losses on our available-for-sale securities were
$3 million and $2 million as of March 28, 2008
and March 30, 2007, respectively. Comprehensive income is
presented in the accompanying Consolidated Statements of
Stockholders Equity and Comprehensive Income.
78
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Newly
Adopted and Recently Issued Accounting Pronouncements
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
SECs 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 Staff Position
(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
Statement of Financial Accounting Standard (SFAS)
No. 142, Goodwill and Other Intangible Assets. 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 March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133.
SFAS No. 161 requires disclosures of how and why an
entity uses derivative instruments, how derivative instruments
and related hedged items are accounted for and how derivative
instruments and related hedged items affect an entitys
financial position, financial performance, and cash flows.
SFAS No. 161 is effective for fiscal years beginning
after November 15, 2008, with early adoption permitted. We
are currently evaluating the impact of the pending adoption of
SFAS No. 161 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 fair value of noncontrolling
equity investment. Additionally, SFAS No. 160 revises
the accounting for both increases and decreases in a
parents 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
(revised R), Business Combinations. 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 acquisition date, and the recognition of changes in the
acquirers 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 first quarter of 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. See Note 17 for further details.
79
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
In August 2007, the FASB issued proposed FASB FSP
No. APB
14-a,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). The proposed FSP would 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 would be recognized at the present
value of its cash flows discounted using the issuers
nonconvertible debt borrowing rate at the time of issuance. The
equity component would be recognized as the difference between
the proceeds from the issuance of the note and the fair value of
the liability. The proposed FSP would also require an accretion
of the resultant debt discount over the expected life of the
debt. The proposed transition guidance requires retrospective
application to all periods presented, and does not grandfather
existing instruments. In March 2008, the FASB approved moving
the proposed FSP to final guidance. The final guidance will be
effective for fiscal years beginning after December 15,
2008, and interim periods within those years. Entities will be
required to apply guidance retrospectively for all periods
presented. If the FSP is issued as proposed, we expect the
increase in non-cash interest expense recognized on our
consolidated financial statements to be significant.
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. We are currently in the
process of evaluating the impact of SFAS No. 159 on
our consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157
establishes a framework for measuring the fair value of assets
and liabilities. This framework is intended to provide increased
consistency in how fair value determinations are made under
various existing accounting standards which permit, or in some
cases require, estimates of fair market value.
SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those
fiscal years. In February 2008, the FASB issued FSP
No. FAS 157-1,
Application of SFAS No. 157 to SFAS No. 13
and Other Accounting Pronouncements That Address Fair Value
Measurements for Purposes of Lease Classification or Measurement
under SFAS No. 13 and FSP
No. FAS 157-2,
Effective Date of SFAS No. 157. Collectively, the
Staff Positions defer the effective date of
SFAS No. 157 to fiscal years beginning after
December 15, 2008, for nonfinancial assets and nonfinancial
liabilities except for items that are recognized or disclosed at
fair value on a recurring basis at least annually, and amend the
scope of SFAS 157. We are currently evaluating the impact
of the pending adoption of SFAS 157 on our consolidated
financial statements.
In September 2006, the FASB issued Emerging Issues Task Force
(EITF) Issue
No. 06-1,
Accounting for Consideration Given by a Service Provider to a
Manufacturer or Reseller of Equipment Necessary for an
End-Customer to Receive Service from the Service Provider.
EITF Issue
No. 06-1
requires that we provide disclosures regarding the nature of
arrangements in which we provide consideration to manufacturers
or resellers of equipment necessary for an end-customer to
receive service from us, including the amounts recognized in the
Consolidated Statements of Income. EITF Issue
No. 06-1
is effective for fiscal years beginning after June 15,
2007. We do not expect the adoption of EITF Issue
No. 06-1
to have a material impact on our consolidated financial
statements.
80
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
|
|
Note 2.
|
Consolidated
Balance Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Trade accounts receivable, net:
|
|
|
|
|
|
|
|
|
Receivables
|
|
$
|
781,514
|
|
|
$
|
687,580
|
|
Less: allowance for doubtful accounts
|
|
|
(8,915
|
)
|
|
|
(8,391
|
)
|
Less: reserve for product returns
|
|
|
(14,399
|
)
|
|
|
(12,221
|
)
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net:
|
|
$
|
758,200
|
|
|
$
|
666,968
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net:
|
|
|
|
|
|
|
|
|
Computer hardware and software
|
|
$
|
925,156
|
|
|
$
|
842,691
|
|
Office furniture and equipment
|
|
|
292,306
|
|
|
|
282,838
|
|
Buildings
|
|
|
492,857
|
|
|
|
533,319
|
|
Leasehold improvements
|
|
|
276,116
|
|
|
|
237,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,986,435
|
|
|
|
1,896,691
|
|
Less: accumulated depreciation and amortization
|
|
|
(1,079,468
|
)
|
|
|
(917,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
906,967
|
|
|
|
979,334
|
|
Land
|
|
|
94,783
|
|
|
|
112,906
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net:
|
|
$
|
1,001,750
|
|
|
$
|
1,092,240
|
|
|
|
|
|
|
|
|
|
|
Note 3. Sales
and Marketing Expense
Technical
support costs
Technical support costs relate to the cost of providing
self-help online services, chat, and email support. Technical
support costs included in Sales and marketing in the
Consolidated Statements of Income for fiscal 2008, 2007, and
2006 were $61 million, $18 million, and
$24 million, respectively.
Advertising
costs
Advertising costs are charged to operations as incurred and
include electronic and print advertising, trade shows,
collateral production, and all forms of direct marketing.
Starting in January 2007, certain advertising contracts contain
placement fee arrangements with escalation clauses which are
expensed on an estimated average cost basis over the term of the
arrangement. The difference between the actual placement fee
paid and the estimated average placement fee cost is included in
Other long-term liabilities on the Consolidated Balance Sheets
for fiscal 2008 and 2007, which were $71 million and
$14 million, respectively. Advertising costs included in
Sales and marketing in the Consolidated Statements of Income for
fiscal 2008, 2007, and 2006 were $555 million,
$382 million, and $253 million, respectively.
81
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Note 4. Acquisitions
Altiris
Purchase
On April 6, 2007, we completed the acquisition of Altiris
Inc., a leading provider of information technology management
software that enables businesses to easily manage and service
network-based endpoints. In exchange for all of the voting
equity interests of Altiris, we paid the following (in
thousands):
|
|
|
|
|
|
Acquisition of common stock outstanding
|
|
$
|
989,863
|
|
Fair value of stock options assumed
|
|
|
16,847
|
|
Fair value of restricted stock awards
|
|
|
4,839
|
|
Acquisition related transaction costs
|
|
|
4,348
|
|
Restructuring costs
|
|
|
22,341
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
1,038,238
|
|
|
|
|
|
|
We believe this acquisition will enable us to help customers
better manage and enforce security policies at the endpoint,
identify and protect against threats, and repair and service
assets. The results of operations of Altiris are included as
part of the Security and Compliance segment. Pro forma
disclosures of the financial results of Altiris were not
included as they were not deemed material.
The following table presents the purchase price allocation
included on our Consolidated Balance Sheets:
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Net tangible
assets(1)
|
|
$
|
237,608
|
|
Identifiable intangible assets:
|
|
|
|
|
Acquired product
rights(2)
|
|
|
89,920
|
|
Other Intangible
Assets(3)
|
|
|
216,446
|
|
Goodwill(4)
|
|
|
633,233
|
|
Deferred tax liability
|
|
|
(138,969
|
)
|
|
|
|
|
|
Total purchase price
|
|
$
|
1,038,238
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net tangible assets include deferred revenue which was adjusted
down from $46 million to $12 million representing our
estimate of the fair value of the contractual obligation assumed
for support services. |
|
(2) |
|
Acquired product rights are amortized over their estimated
useful lives of one to six years. The weighted-average estimated
useful lives were five years. Amounts are amortized to cost of
revenues. |
|
(3) |
|
Other intangible assets are amortized over their estimated
useful lives of three to eight years. The weighted-average
estimated useful lives were eight years. Amounts are amortized
to operating expenses. |
|
(4) |
|
Goodwill is deductible in the state of California for tax
purposes. The amount resulted primarily from our expectation of
synergies from the integration of Altiris product offerings with
our product offerings. |
Vontu
Purchase
On November 30, 2007, we completed the acquisition of Vontu
Inc. (Vontu), a provider of data loss prevention
solutions that assists organizations in preventing the loss of
confidential or proprietary information. The Vontu products are
expected to enhance our endpoint and network security and
storage and compliance solutions offered to customers. In
exchange for all the voting equity interests, we paid a total
purchase price of $321 million, which includes
$14 million in assumed equity awards at fair value,
$5 million in cash assumed and $4 million for
acquisition related transaction costs. On November 29,
2007, we borrowed $200 million under our five-year
82
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
$1 billion senior unsecured revolving credit facility to
partially finance our acquisition of Vontu. See further
discussion in Note 9.
Of the total purchase price, $259 million was allocated to
goodwill, $36 million to acquired product rights,
$33 million to other intangible assets, $10 million to
net tangible assets and $17 million to deferred tax
liabilities. Net tangible assets include deferred revenue which
was adjusted down from $25 million to $2 million
representing our estimate of the fair value of the support
contractual obligation assumed. Goodwill, none of which was
deductible for tax purposes, resulted primarily from our
expectation of synergies from the integration of Vontus
software offerings with our software offerings. Acquired product
rights are amortized to cost of revenues over four years. Other
intangible assets are amortized to operating expenses from three
to eight years.
Financial results for Vontu are included in the Security and
Compliance segment. Pro forma disclosures of the financial
results of Vontu were not included as they were not deemed
material.
Transparent
Logic Purchase
On January 11, 2008, we completed the acquisition of
Transparent Logic Technologies, Inc. (Transparent
Logic), a provider of workflow optimization software.
Transparent Logics products are expected to complement our
existing products. We purchased all of the voting equity
interests of Transparent Logic for $12 million, which
included acquisition related costs. Of the aggregate purchase
price, $9 million was allocated to goodwill and the
remainder to other intangible assets, developed technology and
net tangible assets. Goodwill, none of which was deductible for
tax purposes, was established based on the expectation of
synergies from the integration of Transparent Logics
product offerings with our product offerings. The results of
operations of Transparent Logic are included as part of the
Security and Compliance segment. Proforma disclosures of the
financial results of Transparent Logic were not included as they
were not deemed material.
Company-i
Purchase
On December 1, 2006, we completed the acquisition of
Company-i Limited (Company-i), a UK-based
professional services firm that specialized in addressing key
challenges associated with operating and managing a data center
for customers in the financial services industry, in exchange
for all of the voting equity interests of Company-i. Of the
aggregate $26 million purchase price, $22 million was
allocated to goodwill, $6 million to other intangible
assets and the remainder to net deferred tax liabilities and net
tangible assets. Goodwill, none of which was deductible for tax
purposes, was established based on the expectation of synergies
from the integration of Company-is service offerings with
our service offerings. Other intangible assets are amortized to
operating expenses over eight years. Financial results for
Company-i are included in the Services segment. Pro forma
disclosures of the financial results of Company-i were not
included as they were not deemed material.
As a result of Company-i meeting target billings conditions in
the first quarter of fiscal 2008, as was stipulated in the
merger agreement, we paid Company-i an additional
$11 million in cash. This increase in purchase price
resulted in a respective increase in goodwill.
4FrontSecurity
Purchase
On February 23, 2007, we completed the acquisition of
4FrontSecurity, Inc. (4FrontSecurity), a software
developer and provider of governance, risk management, and
regulatory compliance products that enables customers to measure
and manage business and security assessments of organizational
information. Of the aggregate $7 million purchase price,
$6 million was allocated to goodwill and the remainder to
other intangible assets and liabilities. Goodwill, none of which
was deductible for tax purposes, was established based on the
expectation of synergies from the integration of
4FrontSecuritys technology with our existing product
offerings. Other intangible assets are amortized to operating
expenses over seven years. Financial results for 4FrontSecurity
83
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
are included in the Security and Compliance segment. Pro forma
disclosures of the financial results of 4FrontSecurity were not
included as they were not deemed material.
Note 5. Investment
in Joint Venture
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. We contributed cash of $150 million, licenses
related to certain intellectual property and other intangible
assets in exchange for 49% of the outstanding common shares of
the joint venture. The joint venture will develop, manufacture,
market and support security and storage appliances to global
telecommunications carriers and enterprise customers. We
recorded our initial investment in the joint venture at
$150 million, reflecting our carrying value of the assets
contributed in exchange for the common shares received. Huawei
contributed its telecommunications storage and security business
assets, engineering, sales and marketing resources, personnel,
and licenses related intellectual property in exchange for a 51%
ownership interest in the joint venture.
At March 28, 2008, our carrying value of the investment in
the joint venture exceeded our proportionate share in the
underlying net assets of the joint venture. This excess
primarily relates to differences in the carrying value of the
net assets contributed by Symantec and Huawei upon the formation
of the joint venture which will be amortized over the useful
life of the related assets.
On February 5, 2011, we have a one-time option to purchase
an additional two percent ownership interest from Huawei for
$28 million. We determined the value of the option using
the Black-Scholes option-pricing model. The value of the option
is not considered material to the financial statements and is
recorded in Investment in joint venture on the Balance Sheet. We
have concluded that the option does not meet the definition of a
derivative under SFAS No. 133 Accounting for
Derivative Instruments and Hedging Activities.
Symantec and Huawei each have the right to purchase all of the
other partners ownership interest through a bid process
upon certain triggering events set to occur as early as
February 5, 2011.
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 ventures net income or
loss based on the quarterly financial statements of the joint
venture. We will record our proportionate share of net income or
loss one quarter in arrears. Therefore, the financial results of
the joint venture for the period from February 5, 2008
through March 31, 2008 will be included in our financial
statements in the quarter ending July 4, 2008.
|
|
Note 6.
|
Loss on
Sale of Business
|
During the second quarter of fiscal 2008, the Company determined
that the Application Performance Management (APM)
business in the Storage and Server Management segment (formerly
the Data Center Management segment) did not meet the long-term
strategic objectives of the segment. As a result, the Company
recognized losses related to the write down of intangible assets
of $87 million and $6 million in the second and third
quarters of 2008, respectively. On March 8, 2008, we
consummated an agreement to sell the tangible and intangible
assets of approximately $103 million and liabilities of
approximately $9 million related to the APM business to a
third-party buyer. The Company further recognized a loss of
$2 million in the fourth quarter yielding a total loss of
$95 million recognized during 2008. The APM business did
not have separately identifiable financial and cash flow
information and the loss is therefore considered a loss from
continuing operations. The Company maintains the legal liability
to fulfill customer contracts that existed as of the sale date;
however, the Company has subcontracted this responsibility to
the third-party buyer until the contracts have expired.
84
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
|
|
Note 7.
|
Goodwill,
Acquired Product Rights, and Other Intangible Assets
|
Goodwill
In accordance with SFAS No. 142, we allocate goodwill
to our reporting units, which are the same as our operating
segments. Goodwill is allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage and
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
Security and
|
|
|
Server
|
|
|
|
|
|
Total
|
|
|
|
Products
|
|
|
Compliance
|
|
|
Management
|
|
|
Services
|
|
|
Company
|
|
|
|
(In thousands)
|
|
|
Balance as of March 30, 2007
|
|
$
|
102,810
|
|
|
$
|
4,582,070
|
|
|
$
|
5,400,718
|
|
|
$
|
254,750
|
|
|
$
|
10,340,348
|
|
Goodwill acquired through business
combinations(a)
|
|
|
|
|
|
|
882,321
|
|
|
|
|
|
|
|
11,705
|
|
|
|
894,026
|
|
Goodwill
adjustments(b),(c)
|
|
|
|
|
|
|
(11,294
|
)
|
|
|
(15,723
|
)
|
|
|
|
|
|
|
(27,017
|
)
|
Operating segment
reclassification(d)
|
|
|
|
|
|
|
(1,372,380
|
)
|
|
|
1,280,739
|
|
|
|
91,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 28, 2008
|
|
$
|
102,810
|
|
|
$
|
4,080,717
|
|
|
$
|
6,665,734
|
|
|
$
|
358,096
|
|
|
$
|
11,207,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage and
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
Security and
|
|
|
Server
|
|
|
|
|
|
Total
|
|
|
|
Products
|
|
|
Compliance
|
|
|
Management
|
|
|
Services
|
|
|
Company
|
|
|
|
(In thousands)
|
|
|
Balance as of March 31, 2006
|
|
$
|
102,810
|
|
|
$
|
4,597,889
|
|
|
$
|
5,396,985
|
|
|
$
|
233,361
|
|
|
$
|
10,331,045
|
|
Goodwill acquired through business combinations
|
|
|
|
|
|
|
5,739
|
|
|
|
|
|
|
|
21,820
|
|
|
|
27,559
|
|
Goodwill
adjustments(e)
|
|
|
|
|
|
|
(21,558
|
)
|
|
|
3,733
|
|
|
|
(1,323
|
)
|
|
|
(19,148
|
)
|
Effect of exchange rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
892
|
|
|
|
892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 30, 2007
|
|
$
|
102,810
|
|
|
$
|
4,582,070
|
|
|
$
|
5,400,718
|
|
|
$
|
254,750
|
|
|
$
|
10,340,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Reflects adjustments made to goodwill acquired through business
combinations of approximately $12 million in the Services
segment, including the effects of foreign exchange, for
Company-i, approximately $633 million for Altiris,
approximately $259 million for Vontu, and approximately
$10 million including a tax adjustment for Transparent
Logic. See Note 4 for further detail. |
|
(b) |
|
On March 31, 2007, we adjusted the Security and Compliance
segment Goodwill balance related to a prior acquisition as a
result of the adoption of FIN 48. During the third and the
fourth quarter of fiscal 2008, we adjusted the Goodwill balance
associated with the Veritas and Altiris acquisition as a result
of tax adjustments to stock based compensation, lease payoffs,
and restricted stock award reversals. See Note 17 for
further details. |
|
(c) |
|
The decrease of $16 million in the goodwill balance for the
Storage and Server Management segment is attributable to
$9 million related to the sale of the APM business recorded
during the second, third and fourth quarters of fiscal 2008 and
$7 million related to various acquisition related tax
adjustments. See Note 6 for further detail. |
|
(d) |
|
During the fourth quarter of fiscal 2008 we modified our
operating segments to be better in line with how we manage our
business. As a result of this reclassification the above
adjustments were made as required by SFAS No. 142. See
Note 19 for further details. |
|
(e) |
|
During fiscal 2007, we adjusted the goodwill related to several
prior acquisitions for individually insignificant amounts
primarily related to purchase consideration adjustments for cash
received and adjustments related to taxes. The tax adjustments
consist of adjustments to increase deferred tax liabilities by
approximately $12 million and decrease income taxes payable
by approximately $12 million related to pre-acquisition tax
contingencies and actual tax benefits arising from employee
exercises of assumed fully-vested stock options. |
85
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Goodwill is tested for impairment on an annual basis, or earlier
if indicators of impairment exist. We completed our annual
goodwill impairment test required by SFAS No. 142
during the March 2008 quarter and determined that there was no
impairment of goodwill.
Acquired
product rights, net
Acquired product rights subject to amortization are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2008
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Developed technology
|
|
$
|
1,655,895
|
|
|
$
|
(1,045,383
|
)
|
|
$
|
610,512
|
|
Patents
|
|
|
71,313
|
|
|
|
(32,875
|
)
|
|
|
38,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,727,208
|
|
|
$
|
(1,078,258
|
)
|
|
$
|
648,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2007
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Developed technology
|
|
$
|
1,610,199
|
|
|
$
|
(754,328
|
)
|
|
$
|
855,871
|
|
Patents
|
|
|
79,684
|
|
|
|
(25,677
|
)
|
|
|
54,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,689,883
|
|
|
$
|
(780,005
|
)
|
|
$
|
909,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2008, 2007, and 2006, amortization expense for
acquired product rights was $349 million,
$342 million, and $314 million, respectively.
Amortization of acquired product rights is included in Cost of
revenues in the Consolidated Statements of Income.
The weighted-average remaining estimated lives of acquired
product rights are approximately 2 years for developed
technology and approximately 3 years for patents. The
weighted-average remaining estimated life of acquired product
rights in total is approximately 2 years. Annual
amortization of acquired product rights, based upon our existing
acquired product rights and their current useful lives, as of
March 28, 2008, is estimated to be as follows:
|
|
|
|
|
2009
|
|
$
|
338,748
|
|
2010
|
|
|
200,790
|
|
2011
|
|
|
69,935
|
|
2012
|
|
|
27,585
|
|
2013
|
|
|
3,477
|
|
Thereafter
|
|
|
8,415
|
|
|
|
|
|
|
|
|
$
|
648,950
|
|
|
|
|
|
|
86
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Other
intangible assets, net
Other intangible assets subject to amortization are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2008
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Customer base
|
|
$
|
1,661,683
|
|
|
$
|
(526,512
|
)
|
|
$
|
1,135,171
|
|
Tradename
|
|
|
125,203
|
|
|
|
(38,933
|
)
|
|
|
86,270
|
|
Norton
tradename(1)
|
|
|
22,083
|
|
|
|
|
|
|
|
22,083
|
|
Partnership agreements
|
|
|
2,300
|
|
|
|
(2,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,811,269
|
|
|
$
|
(567,745
|
)
|
|
$
|
1,243,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2007
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Customer base
|
|
$
|
1,500,201
|
|
|
$
|
(335,393
|
)
|
|
$
|
1,164,808
|
|
Tradename
|
|
|
107,207
|
|
|
|
(27,335
|
)
|
|
|
79,872
|
|
Partnership agreements
|
|
|
2,300
|
|
|
|
(1,342
|
)
|
|
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,609,708
|
|
|
$
|
(364,070
|
)
|
|
$
|
1,245,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Norton tradename has an indefinite life and is not subject
to amortization. |
In fiscal 2008, 2007, and 2006, amortization expense for other
intangible assets was $225 million, $201 million, and
$149 million, respectively. Amortization of other
intangible assets is included in Operating expenses in the
Consolidated Statements of Income. The weighted-average
remaining estimated lives for other intangible assets are
approximately 5 years for customer base and approximately
7 years for trade name. The weighted-average remaining
estimated life of other intangible assets in total is
approximately 6 years. Annual amortization of other
intangible assets, based upon our existing intangible assets and
their current estimated lives, as of March 28, 2008, is
estimated to be as follows:
|
|
|
|
|
2009
|
|
$
|
243,198
|
|
2010
|
|
|
219,133
|
|
2011
|
|
|
218,383
|
|
2012
|
|
|
216,310
|
|
2013
|
|
|
214,345
|
|
Thereafter
|
|
|
132,155
|
|
|
|
|
|
|
|
|
$
|
1,243,524
|
|
|
|
|
|
|
87
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Cash,
cash equivalents, and short-term investments
Cash, cash equivalents, and short-term investments are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2008
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
583,893
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
583,893
|
|
Money market funds
|
|
|
527,009
|
|
|
|
|
|
|
|
|
|
|
|
527,009
|
|
Commercial paper
|
|
|
734,615
|
|
|
|
|
|
|
|
|
|
|
|
734,615
|
|
Bank securities and deposits
|
|
|
44,708
|
|
|
|
|
|
|
|
|
|
|
|
44,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
1,890,225
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,890,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities
|
|
$
|
52,377
|
|
|
$
|
210
|
|
|
$
|
(2,802
|
)
|
|
$
|
49,785
|
|
Corporate securities
|
|
|
46,617
|
|
|
|
155
|
|
|
|
(408
|
)
|
|
|
46,364
|
|
Commercial paper
|
|
|
436,342
|
|
|
|
|
|
|
|
|
|
|
|
436,342
|
|
Government and government-sponsored securities
|
|
|
997
|
|
|
|
3
|
|
|
|
|
|
|
|
1,000
|
|
Other investments
|
|
|
3,237
|
|
|
|
|
|
|
|
|
|
|
|
3,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
$
|
539,570
|
|
|
$
|
368
|
|
|
$
|
(3,210
|
)
|
|
$
|
536,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2007
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
587,675
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
587,675
|
|
Money market funds
|
|
|
561,240
|
|
|
|
|
|
|
|
|
|
|
|
561,240
|
|
Commercial paper
|
|
|
1,354,302
|
|
|
|
|
|
|
|
|
|
|
|
1,354,302
|
|
Corporate securities
|
|
|
10,709
|
|
|
|
|
|
|
|
|
|
|
|
10,709
|
|
Bank securities and deposits
|
|
|
45,108
|
|
|
|
|
|
|
|
|
|
|
|
45,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
2,559,034
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,559,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities
|
|
$
|
133,314
|
|
|
$
|
149
|
|
|
$
|
(101
|
)
|
|
$
|
133,362
|
|
Corporate securities
|
|
|
121,666
|
|
|
|
119
|
|
|
|
(875
|
)
|
|
|
120,910
|
|
Commercial paper
|
|
|
10,300
|
|
|
|
|
|
|
|
|
|
|
|
10,300
|
|
Government and government-sponsored securities
|
|
|
145,185
|
|
|
|
87
|
|
|
|
(1,137
|
)
|
|
|
144,135
|
|
Other investments
|
|
|
426
|
|
|
|
|
|
|
|
|
|
|
|
426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
$
|
410,891
|
|
|
$
|
355
|
|
|
$
|
(2,113
|
)
|
|
$
|
409,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
As of March 28, 2008, the unrealized losses in the above
table related to short-term investment securities for which the
fair value was less than the cost basis. We expect to receive
the full principal and interest on these securities. We
regularly review our investment portfolio according to FSP
FAS 115-1
The Meaning of Other Than Temporary Impairment and Its
Application to Certain Investments (FSP
FAS 115-1).
We identify and evaluate investments that have indications of
possible impairment. Factors considered in determining whether a
loss is temporary include: the length of time and extent to
which the fair market value has been lower than the cost basis,
the financial condition and near-term prospects of the investee,
credit quality, and our ability to hold the investment for a
period of time sufficient to allow for any anticipated recovery
in fair market value. The gross unrealized losses related to
investments are primarily due to a decrease in the fair market
value of fixed-rate debt securities as a result of changes in
interest rates. As of March 28, 2008 and March 30,
2007 we have recorded no write-downs related to other than
temporary impairments of short-term investment securities.
Unrealized gains and losses on available-for-sale securities are
reported as a component of Stockholders equity in the
Consolidated Balance Sheets. We recognized net realized losses
of an insignificant amount for both fiscal 2008 and fiscal 2007,
and $5 million in fiscal 2006. These net realized losses
are included in Interest income.
The estimated fair value of cash equivalents and short-term
investments by contractual maturity as of March 28, 2008 is
as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Due in one year or less
|
|
$
|
1,780,153
|
|
Due one to five years
|
|
|
9,172
|
|
Due five to ten years
|
|
|
13,166
|
|
Due in ten years or more
|
|
|
40,569
|
|
|
|
|
|
|
|
|
$
|
1,843,060
|
|
|
|
|
|
|
The following table provides the gross unrealized losses and the
fair market value of our investments with unrealized losses that
are not deemed to be other-than-temporarily impaired, aggregated
by investment category and length of time that individual
securities have been in a continuous unrealized loss position as
of March 28, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Loss Position for Less Than
|
|
|
In Loss Position for 12 Months
|
|
|
|
|
|
|
12 Months
|
|
|
or Greater
|
|
|
Total
|
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
(In thousands)
|
|
|
Asset-backed debt securities
|
|
$
|
10,058
|
|
|
$
|
354
|
|
|
$
|
23,362
|
|
|
$
|
2,448
|
|
|
$
|
33,420
|
|
|
$
|
2,802
|
|
Corporate debt securities
|
|
|
9,245
|
|
|
|
258
|
|
|
|
5,830
|
|
|
|
150
|
|
|
|
15,075
|
|
|
|
408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,303
|
|
|
$
|
612
|
|
|
$
|
29,192
|
|
|
$
|
2,598
|
|
|
$
|
48,495
|
|
|
$
|
3,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
investments in privately held companies
As of March 28, 2008 and March 30, 2007, we held
equity investments with a carrying value of $6 million and
$8 million, respectively, in several privately-held
companies. These investments are recorded at cost as we do not
have significant influence over the investees and are included
in Other long-term assets in the Consolidated Balance Sheets. In
fiscal 2008, 2007, and 2006, we recognized declines in value of
these investments that were determined to be
other-than-temporary, in accordance with FSP
FAS 115-1,
of $1 million, $3 million, and $4 million,
respectively. The other-than-temporary declines in fair value
were recorded as Other income (expense), net in the Consolidated
Statements of Income.
89
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Convertible
senior notes
In June 2006, we issued $1.1 billion principal amount of
0.75% Convertible Senior Notes due June 15, 2011, or
the 0.75% Notes, and $1.0 billion principal amount of
1.00% Convertible Senior Notes due June 15, 2013, or
the 1.00% Notes, to initial purchasers in a private
offering for resale to qualified institutional buyers pursuant
to SEC Rule 144A. We refer to the 0.75% Notes and the
1.00% Notes collectively as the Senior Notes. We received
proceeds of $2.1 billion from the Senior Notes and incurred
net transaction costs of approximately $33 million, which
were allocated proportionately to the 0.75% Notes and the
1.00% Notes. The transaction costs were primarily recorded
in other long-term assets and are being amortized to interest
expense using the effective interest method over five years for
the 0.75% Notes and seven years for the 1.00% Notes.
The 0.75% Notes and 1.00% Notes were each issued at
par and bear interest at 0.75% and 1.00% per annum,
respectively. Interest is payable semiannually in arrears on
June 15 and December 15, beginning December 15, 2006.
Each $1,000 of principal of the Senior Notes will initially be
convertible into 52.2951 shares of Symantec common stock,
which is the equivalent of $19.12 per share, subject to
adjustment upon the occurrence of specified events. Holders of
the Senior Notes may convert their Senior Notes prior to
maturity during specified periods as follows: (1) during
any calendar quarter beginning after June 30, 2006, if the
closing price of our common stock for at least 20 trading days
in the 30 consecutive trading days ending on the last trading
day of the immediately preceding calendar quarter is more than
130% of the applicable conversion price per share; (2) if
specified corporate transactions, including a change in control,
occur; (3) with respect to the 0.75% Notes, at any
time on or after April 5, 2011, and with respect to the
1.00% Notes, at any time on or after April 5, 2013; or
(4) during the five
business-day
period after any five consecutive
trading-day
period during which the trading price of the Senior Notes falls
below a certain threshold. 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. Holders who convert their
Senior Notes in connection with a change in control may be
entitled to a make whole premium in the form of an
increase in the conversion rate. As of March 28, 2008, none
of the conditions allowing holders of the Senior Notes to
convert had been met. In addition, upon a change in control of
Symantec, the holders of the Senior Notes may require us to
repurchase for cash all or any portion of their Senior Notes for
100% of the principal amount.
Under the terms of the Senior Notes, we were required to use
reasonable efforts to file a shelf registration statement
regarding the Senior Notes with the SEC and cause the shelf
registration statement to be declared effective within
180 days of the closing of the offering of the Senior
Notes. In addition, we must maintain the effectiveness of the
shelf registration statement for a period of two years after the
closing of the offering of the Senior Notes. If we fail to meet
these terms, we will be required to pay additional interest on
the Senior Notes in the amount of 0.25% per annum. We have filed
the shelf registration statement with the SEC and it became
effective on December 11, 2006.
Concurrently with the issuance of the Senior Notes, we entered
into note hedge transactions 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. The options as to 58 million shares expire on
June 15, 2011 and the options as to 52 million shares
expire on June 15, 2013. The options must be settled in net
shares. The cost of the note hedge transactions to us was
approximately $592 million. In addition, we sold warrants
to affiliates of certain of the initial purchasers whereby they
have the option to purchase up to 110 million shares of our
common stock at a price of $27.3175 per share. The warrants
expire on various dates from July 2011 through August 2013 and
must be settled in net shares. We received approximately
$326 million in cash proceeds from the sale of these
warrants.
The cost incurred in connection with the note hedge
transactions, net of the related tax benefit and the proceeds
from the sale of the warrants, is included as a net reduction in
Capital in excess of par value in the accompanying
90
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Consolidated Balance Sheet as of March 28, 2008, in
accordance with the guidance in EITF
No. 00-19,
Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock.
In accordance with SFAS No. 128, Earnings per
Share, the Senior Notes will have no impact on diluted
earnings per share, or EPS, until the price of our common stock
exceeds the conversion price of $19.12 per share because the
principal amount of the Senior Notes will be settled in cash
upon conversion. Prior to conversion, we will include the effect
of the additional shares that may be issued if our common stock
price exceeds $19.12 per share using the treasury stock method.
As a result, for the first $1.00 by which the average price of
our common stock for a quarterly period exceeds $19.12 per share
there would be dilution of approximately 5.4 million
shares. As the share price continues to increase, additional
dilution would occur at a declining rate such that an average
price of $27.3175 per share would yield cumulative dilution of
approximately 32.9 million shares. If the average price of
our common stock exceeds $27.3175 per share for a quarterly
period we will also include the effect of the additional
potential shares that may be issued related to the warrants
using the treasury stock method. The Senior Notes along with the
warrants have a combined dilutive effect such that for the first
$1.00 by which the average price exceeds $27.3175 per share
there would be cumulative dilution of approximately
39.5 million shares prior to conversion. As the share price
continues to increase, additional dilution would occur but at a
declining rate.
Prior to conversion, the note hedge transactions are not
considered for purposes of the EPS calculation, as their effect
would be anti-dilutive. Upon conversion, the note hedge will
automatically serve to neutralize the dilutive effect of the
Senior Notes when the stock price is above $19.12 per share. For
example, if upon conversion the price of our common stock was
$28.3175 per share, the cumulative effect of approximately
39.5 million shares in the example above would be reduced
to approximately 3.9 million shares.
The preceding calculations assume that the average price of our
common stock exceeds the respective conversion prices during the
period for which EPS is calculated and exclude any potential
adjustments to the conversion ratio provided under the terms of
the Senior Notes. See Note 13 for information regarding the
impact on EPS of the Senior Notes and warrants in the current
period.
Line
of credit
In July 2006, we entered into a five-year $1 billion senior
unsecured revolving credit facility that expires in July 2011.
Borrowings under the facility bear interest, at our option, at
either a rate equal to the banks base rate or a rate equal
to LIBOR plus a margin based on our leverage ratio, as defined
in the credit facility agreement. In connection with the credit
facility, we must maintain certain covenants, including a
specified ratio of debt to earnings before interest, taxes,
depreciation, and amortization, as defined, as well as various
other non-financial covenants.
On November 29, 2007, we borrowed $200 million under
this credit agreement to partially finance our acquisition of
Vontu. This outstanding borrowing amount bears interest at
4.7075% per annum, which is due and payable quarterly. Payment
of the principal amount is due on November 28, 2008. Total
interest expense accumulated as of March 28, 2008 is
approximately $3 million, of which $2 million was paid
and $1 million was accrued and included in Other current
liabilities on the Consolidated Balance Sheets. On
March 28, 2008, we had $200 million in outstanding
borrowings included in Short-term borrowings on our Consolidated
Balance Sheets related to this credit facility and were in
compliance with all of the covenants. There were no borrowings
under this credit facility at March 30, 2007.
|
|
Note 10.
|
Assets
Held for Sale
|
During fiscal 2008, following a review of our real estate
holdings we determined that certain long-term assets were
underutilized. As a result, we have committed to sell vacant
buildings and land with a total carrying value of
$39 million and no associated liabilities. In accordance
with the provisions of SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, we
designated these buildings and land as assets held for sale and
91
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
included them in Other current assets on our Consolidated
Balance Sheets. 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. We recorded a $1 million impairment loss because the
carrying value was greater than the estimated fair value less
cost to sell for the year ended March 28, 2008. This
impairment was included in Research and development expense on
our Consolidated Statements of Income. We believe that these
sales will be completed no later than the end of fiscal 2009.
Leases
We lease certain of our facilities and equipment under operating
leases that expire at various dates through 2022. We currently
sublease some space under various operating leases that will
expire on various dates through 2018. Some of our leases contain
renewal options, escalation clauses, rent concessions, and
leasehold improvement incentives.
The future fiscal year minimum operating lease commitments and
existing sublease information were as follows as of
March 28, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
Sublease
|
|
|
Net Lease
|
|
|
|
Commitment
|
|
|
Income
|
|
|
Commitment
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
102,799
|
|
|
$
|
5,948
|
|
|
$
|
96,851
|
|
2010
|
|
|
86,422
|
|
|
|
6,348
|
|
|
|
80,074
|
|
2011
|
|
|
66,734
|
|
|
|
5,475
|
|
|
|
61,259
|
|
2012
|
|
|
53,954
|
|
|
|
3,488
|
|
|
|
50,466
|
|
2013
|
|
|
46,831
|
|
|
|
2,442
|
|
|
|
44,389
|
|
Thereafter
|
|
|
164,012
|
|
|
|
2,744
|
|
|
|
161,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
520,752
|
|
|
$
|
26,445
|
|
|
|
494,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net lease commitment amount includes $13 million
related to facilities that are included in our restructuring
reserve. For more information, see Note 16.
Rent expense charged to operations totaled $87 million,
$83 million, and $70 million in fiscal 2008, 2007, and
2006, respectively.
Royalties
We have certain royalty commitments associated with the shipment
and licensing of certain products. Royalty expense is generally
based on a dollar amount per unit shipped or a percentage of
underlying revenue. Certain royalty commitments have minimum
commitment obligations; however, as of March 28, 2008 all
such obligations are not material.
Indemnification
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.
92
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
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.
|
|
Note 12.
|
Stock
Transactions
|
Stock
repurchases
We have operated stock repurchase programs since 2001. On
January 24, 2007, our Board of Directors authorized the
repurchase of $1 billion of Symantec common stock. As of
March 30, 2007, $500 million remained authorized for
future purchases. During the three-month period ended
June 29, 2007, we repurchased 25 million shares of our
common stock at prices ranging from $19.42 to $20.16 per share
which completed the $1 billion share repurchase program
announced in January 2007.
On June 14, 2007, our Board of Directors authorized the
repurchase of $2 billion of Symantec common stock, without
a scheduled expiration date. During the period between
June 30, 2007 and March 28, 2008, we repurchased a
total of 56 million shares of our common stock at prices
ranging from $16.67 to $19.69 per share for an aggregate amount
of $1 billion from the authorized repurchase plan.
As a result of the repurchase activity under both the
January 24, 2007 plan and June 14, 2007 plans, during
fiscal 2008, we repurchased a total of 81 million shares of
our common stock at prices ranging from $16.67 to $20.16 per
share, for an aggregate amount of $1.5 billion. As of
March 28, 2008, $1 billion remained authorized for
future repurchases from the June 14, 2007 plan.
During fiscal 2007, we repurchased 162 million shares of
our common stock at prices ranging from $15.61 to $21.66 per
share for an aggregate amount of $2.8 billion.
Increase
to authorized shares
On June 24, 2005, our stockholders approved the adoption of
our amended and restated certificate of incorporation, which
increased the number of authorized shares of common stock to
3 billion from 1.6 billion. The increase was sought in
order to carry out our acquisition of Veritas.
|
|
Note 13.
|
Earnings
Per Share
|
Basic and diluted earnings per share are computed on the basis
of the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share also
includes the incremental effect of dilutive potential common
shares outstanding during the period using the treasury stock
method. Dilutive potential common shares include shares
underlying outstanding stock options, stock awards, warrants,
and convertible notes.
93
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
The components of earnings per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share data)
|
|
|
Earnings per share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
463,850
|
|
|
$
|
404,380
|
|
|
$
|
156,852
|
|
Weighted average outstanding common shares
|
|
|
867,562
|
|
|
|
960,575
|
|
|
|
998,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$
|
0.53
|
|
|
$
|
0.42
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
463,850
|
|
|
$
|
404,380
|
|
|
$
|
156,852
|
|
Weighted average outstanding common shares
|
|
|
867,562
|
|
|
|
960,575
|
|
|
|
998,733
|
|
Shares issuable from assumed exercise of options
|
|
|
15,191
|
|
|
|
20,047
|
|
|
|
27,081
|
|
Dilutive impact of restricted stock and restricted stock units
|
|
|
1,383
|
|
|
|
522
|
|
|
|
42
|
|
Dilutive impact of assumed conversion of senior notes
|
|
|
|
|
|
|
2,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares for purposes of calculating diluted earnings per
share
|
|
|
884,136
|
|
|
|
983,261
|
|
|
|
1,025,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted
|
|
$
|
0.52
|
|
|
$
|
0.41
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following potential common shares were excluded from the
computation of diluted earnings per share, as their effect would
have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
March 31,
|
|
|
|
2008(2)
|
|
|
2007(2)
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Stock options
|
|
|
65,955
|
|
|
|
69,186
|
|
|
|
56,348
|
|
Restricted stock units
|
|
|
113
|
|
|
|
109
|
|
|
|
146
|
|
Veritas
0.25% notes(1)
|
|
|
|
|
|
|
|
|
|
|
12,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,068
|
|
|
|
69,295
|
|
|
|
69,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On August 28, 2006 the Veritas 0.25% senior notes were
fully paid off at the Companys election. |
|
(2) |
|
For fiscal 2008, the effect of the warrants issued and option
purchased in connection with the convertible senior notes were
excluded because, as discussed in Note 9, they have no
impact on diluted earnings per share until our average stock
price for the applicable period reaches $27.3175 per share and
$19.12 per share, respectively. |
|
|
Note 14.
|
Adoption
of Stockholder Rights Plan
|
On August 11, 1998, the Board of Directors adopted a
stockholder rights plan designed to ensure orderly consideration
of any future unsolicited acquisition attempt to ensure a fair
value of Symantec for our stockholders. In connection with the
plan, the Board of Directors declared and paid a dividend of one
preferred share purchase right for each share of Symantec common
stock outstanding on the record date, August 21, 1998. The
rights are initially attached to Symantec common stock and will
not trade separately. If a person or a group, an Acquiring
Person, acquires 20% or more of our common stock, or announces
an intention to make a tender offer for 20% or more of our
common stock, the rights will be distributed and will thereafter
trade separately from the common stock.
94
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
If the rights become exercisable, each right (other than rights
held by the Acquiring Person) will entitle the holder to
purchase, at a price equal to the exercise price of the right, a
number of shares of our common stock having a then-current value
of twice the exercise price of the right. If, after the rights
become exercisable, we agree to merge into another entity or we
sell more than 50% of our assets, each right will entitle the
holder to purchase, at a price equal to the exercise price of
the right, a number of shares of common stock of such entity
having a then-current value of twice the exercise price.
We may exchange the rights at a ratio of one share of common
stock for each right (other than the Acquiring Person) at any
time after an Acquiring Person acquires 20% or more of our
common stock but before such person acquires 50% or more of our
common stock. We may also redeem the rights at our option at a
price of $0.001 per right at any time before an Acquiring Person
has acquired 20% or more of our common stock. The rights will
expire on August 12, 2008.
|
|
Note 15.
|
Employee
Benefits and Stock-Based Compensation
|
401(k)
plan
We maintain a salary deferral 401(k) plan for all of our
domestic employees. This plan allows employees to contribute up
to 50% of their pretax salary up to the maximum dollar
limitation prescribed by the Internal Revenue Code. We match 50%
of the employees contribution. The maximum match in any
given plan year is the lower of 3% of the employees
eligible compensation or $6,000. Our contributions under the
plan were $24 million, $24 million, and
$12 million, in fiscal 2008, 2007, and 2006, respectively.
Stock
purchase plans
2002
Executive Officers Stock Purchase Plan
In September 2002, our stockholders approved the 2002 Executive
Officers Stock Purchase Plan and reserved
250,000 shares of common stock for issuance thereunder,
which was amended by our Board of Directors in January 2008. The
purpose of the plan is to provide executive officers with a
means to acquire an equity interest in Symantec at fair market
value by applying a portion or all of their respective bonus
payments towards the purchase price. As of March 28, 2008,
40,401 shares have been issued under the plan and
209,599 shares remain available for future issuance. Shares
reserved for issuance under this plan have not been adjusted for
the stock dividends.
1998
Employee Stock Purchase Plan
In September 1998, our stockholders approved the 1998 Employee
Stock Purchase Plan, or ESPP, and reserved 4 million shares
of common stock for issuance thereunder. In September 1999, the
ESPP was amended by our stockholders to increase the shares
available for issuance by 6 million and to add an
evergreen provision whereby the number of shares
available for issuance increased automatically on January 1 of
each year (beginning in 2000) by 1% of our outstanding
shares of common stock on each immediately preceding December 31
during the term of the ESPP. In July 2004, the Board of
Directors eliminated this provision. As of March 28, 2008,
9.6 million shares remain available for issuance under the
ESPP.
Subject to certain limitations, our employees may elect to have
2% to 10% of their compensation withheld through payroll
deductions to purchase shares of common stock under the ESPP.
Employees purchase shares of common stock at a price per share
equal to 85% of the fair market value on the purchase date at
the end of each six-month purchase period. For purchases prior
to July 1, 2005, employees purchased shares at a price
equal to the lesser of 85% of the fair market value as of the
beginning of the two-year offering period or the end of the
six-month purchase period. The Board of Directors eliminated the
two-year offering period in March 2005, effective July 1,
2005. Under the ESPP, 5 million, 4 million, and
4 million shares were issued during fiscal 2008, 2007, and
2006, respectively, representing $69 million,
$65 million, and $59 million in contributions,
respectively. As of March 28, 2008, a total of
29 million shares had been issued under this plan.
95
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Stock
award plans
2000 Director
Equity Incentive Plan
In September 2000, our stockholders approved the
2000 Director Equity Incentive Plan and reserved
50,000 shares of common stock for issuance thereunder. In
September 2004 and September 2007, stockholders increased the
number of shares of stock that may be issued by 50,000. The
purpose of this plan is to provide the members of the Board of
Directors with an opportunity to receive common stock for all or
a portion of the retainer payable to each director for serving
as a member. Each director may elect 50% to 100% of the retainer
to be paid in the form of stock. As of March 28, 2008, a
total of 95,551 shares had been issued under this plan and
54,449 shares remained available for future issuance.
2004
Equity Incentive Plan
Under the 2004 Equity Incentive Plan, (2004 Plan)
our Board of Directors, or a committee of the Board of
Directors, may grant incentive and nonqualified stock options,
stock appreciation rights, restricted stock units, RSUs, or
restricted stock awards to employees, officers, directors,
consultants, independent contractors, and advisors to us, or to
any parent, subsidiary, or affiliate of ours. The purpose of the
2004 Plan is to attract, retain, and motivate eligible persons
whose present and potential contributions are important to our
success by offering them an opportunity to participate in our
future performance through equity awards of stock options and
stock bonuses. Under the terms of the 2004 Plan, the exercise
price of stock options may not be less than 100% of the fair
market value on the date of grant. Options generally vest over a
four-year period. Options granted prior to October 2005
generally have a maximum term of ten years and options granted
thereafter generally have a maximum term of seven years.
As of March 28, 2008, we have reserved 77 million
shares for issuance under the 2004 Plan. These shares include
18 million shares originally reserved for issuance under
the 2004 Plan upon its adoption by our stockholders in September
2004, 19 million shares that were transferred to the 2004
Plan from the 1996 Equity Incentive Plan, (1996
Plan) and 40 million shares that were approved for
issuance on the amendment and restatement of the 2004 Plan at
our 2006 annual meeting of stockholders. In addition to the
shares currently reserved under the 2004 Plan, any shares
reacquired by us from options outstanding under the 1996 Plan
upon their expiration will also be added to the 2004 Plan
reserve. As of March 28, 2008, 41 million shares
remain available for future grant under the 2004 Plan.
At our 2006 annual meeting of stockholders, our stockholders
approved the amendment and restatement of the 2004 Plan, which
included the following key changes: 1) an increase of
40 million shares reserved for issuance under the 2004
Plan; 2) modification of the share pool available under the
2004 Plan to reflect a ratio-based pool, where the grant of each
full-value award, such as a share of restricted stock
(RSU), decreases the pool by two shares; and
3) a change in the form of equity grants to our
non-employee directors from stock options to a fixed dollar
amount of RSUs.
Assumed
Vontu stock options
In connection with our acquisition of Vontu, we assumed all
unexercised, outstanding options to purchase Vontu common stock.
Each unexercised, outstanding option assumed was converted into
an option to purchase Symantec common stock after applying the
exchange ratio of 0.5351 shares of Symantec common stock
for each share of Vontu common stock. In total, all unexercised,
outstanding Vontu options were converted into options to
purchase approximately 2.2 million shares of Symantec
common stock. As of March 28, 2008, total unrecognized
compensation cost adjusted for estimated forfeitures related to
unexercised, outstanding Vontu stock options was approximately
$11 million.
Furthermore, all shares obtained upon exercise of unvested Vontu
options were converted into the right to receive cash of $9.33
per share upon vesting. The total value of the assumed
exercised, unvested Vontu options on the date of acquisition was
approximately $7 million, assuming no options are forfeited
prior to vesting. As of March 28, 2008, total unrecognized
compensation cost adjusted for estimated forfeitures related to
exercised, unvested Vontu stock options was approximately
$4 million.
96
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
The assumed options retained all applicable terms and vesting
periods, except for certain options that were accelerated
according to a change in control provision and will generally
vest within a twelve month period from the date of acquisition
and certain other options that vested in full as of the
acquisition date. In general, the assumed options typically vest
over a period of four years from the original date of grant of
the option and have a maximum term of ten years.
Assumed
Altiris stock options and awards
In connection with our acquisition of Altiris, we assumed all of
the outstanding options to purchase Altiris common stock. Each
option assumed was converted into an option to purchase Symantec
common stock after applying the exchange ratio of
1.9075 shares of Symantec common stock for each share of
Altiris common stock. In total, we assumed and converted Altiris
options into options to purchase approximately 3 million
shares of Symantec common stock. In addition, we assumed and
converted all outstanding Altiris RSUs into approximately
320,000 Symantec RSUs, based on the same exchange ratio.
Furthermore, we assumed all outstanding Altiris Restricted Stock
Awards (RSAs) which were converted into the right to
receive cash in the amount of $33.00 per share upon vesting. The
total value of the assumed RSAs on the date of acquisition was
approximately $9 million, assuming no RSAs are forfeited
prior to vesting. As of March 28, 2008, total unrecognized
compensation cost adjusted for estimated forfeitures, related to
the Altiris unvested stock options, RSUs and RSAs, was
$1 million, $1 million, and $1 million,
respectively.
The assumed options, RSUs, and RSAs retained all applicable
terms and vesting periods, except for certain options, RSAs and
RSUs that were accelerated according to the executive vesting
plan and will generally vest over a four to twelve month period
from the date of acquisition and certain other options that
vested in full as of the acquisition date. In general, the
assumed options typically vest over a period of three to four
years from the original date of grant and have a maximum term of
ten years. The assumed RSUs and RSAs typically vest over a
period of two to three years from the original date of grant.
Assumed
Veritas stock options
In connection with our acquisition of Veritas, we assumed each
outstanding option to purchase Veritas common stock with an
exercise price equal to or less than $49.00 as well as each
additional option required to be assumed by applicable law. Each
option assumed was converted into an option to purchase Symantec
common stock after applying the exchange ratio of
1.1242 shares of Symantec common stock for each share of
Veritas common stock. In total, we assumed and converted Veritas
options into options to purchase 66 million shares of
Symantec common stock. In addition, we assumed and converted all
outstanding Veritas RSUs into approximately 425,000 Symantec
RSUs based on the same exchange ratio.
The assumed options and RSUs retained all applicable terms and
vesting periods. In general, the assumed options vest over a
four-year period from the original date of grant. Options
granted prior to May 2004 generally have a maximum term of
10 years and options granted thereafter generally have a
maximum term of seven years. The assumed RSUs generally vest
over a three or four year period from the original date of grant.
Other
stock option plans
Options remain outstanding under several other stock option
plans, including the 2001 Non-Qualified Equity Incentive Plan,
the 1999 Acquisition Plan, the 1996 Plan, and various plans
assumed in connection with acquisitions. No further options may
be granted under any of these plans.
Acceleration
of stock option vesting
On March 30, 2006, we accelerated the vesting of certain
stock options with exercise prices equal to or greater than
$27.00 per share that were outstanding on that date. We did not
accelerate the vesting of any stock options held by our
executive officers or directors. The vesting of options to
purchase approximately 7 million shares of common stock, or
approximately 14% of our outstanding unvested options, was
accelerated. The weighted-average exercise price of the stock
options for which vesting was accelerated was $28.73. We
accelerated the vesting of the options to
97
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
reduce future stock-based compensation expense that we would
otherwise be required to recognize in our results of operations
after adoption of SFAS No. 123R. Because of system
constraints, it is not practicable for us to estimate the amount
by which the acceleration of vesting will reduce our future
stock-based compensation expense. The acceleration of the
vesting of these options did not result in a charge to expense
in fiscal 2006.
Valuation
of stock-based awards
The fair value of each stock option granted under our equity
incentive plans and each ESPP purchase right granted prior to
July 1, 2005 is estimated on the date of grant using the
Black-Scholes option-pricing model with the following
weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
|
Employee
|
|
|
Stock
|
|
|
|
Stock Options
|
|
|
Purchase Plan
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
Expected life
|
|
|
3 years
|
|
|
|
3 years
|
|
|
|
3 years
|
|
|
|
0.5 years
|
|
Expected volatility
|
|
|
33
|
%
|
|
|
34
|
%
|
|
|
45
|
%
|
|
|
33
|
%
|
Risk-free interest rate
|
|
|
4.52
|
%
|
|
|
4.86
|
%
|
|
|
3.55
|
%
|
|
|
4.26
|
%
|
The expected life of options is 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 the 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. The fair value of each RSU is equal to the market value of
Symantecs common stock on the date of grant. The fair
value of each ESPP purchase right granted from July 1, 2005
onwards is equal to the 15% discount on shares purchased. We
estimate forfeitures of options, and RSUs, at the time of grant
based on historical experience and record compensation expense
only for those awards that are expected to vest.
98
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Stock-based
compensation expense
Stock-based compensation is classified in the Consolidated
Statements of Income in the same expense line items as cash
compensation. The following table sets forth the total
stock-based compensation expense recognized in our Consolidated
Statements of Income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except net income per share data)
|
|
|
Cost of revenues Content, subscriptions, and
maintenance
|
|
$
|
13,003
|
|
|
$
|
12,373
|
|
|
$
|
439
|
|
Cost of revenues Licenses
|
|
|
3,731
|
|
|
|
4,064
|
|
|
|
|
|
Sales and marketing
|
|
|
58,181
|
|
|
|
55,895
|
|
|
|
13,314
|
|
Research and development
|
|
|
57,597
|
|
|
|
57,132
|
|
|
|
17,497
|
|
General and administrative
|
|
|
31,183
|
|
|
|
24,416
|
|
|
|
7,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
|
163,695
|
|
|
|
153,880
|
|
|
|
38,401
|
|
Tax benefit associated with stock-based compensation expense
|
|
|
(41,589
|
)
|
|
|
(35,415
|
)
|
|
|
(11,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on net income
|
|
$
|
122,106
|
|
|
$
|
118,465
|
|
|
$
|
26,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on earnings per
share basic
|
|
$
|
0.14
|
|
|
$
|
0.12
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on earnings per
share - diluted
|
|
$
|
0.14
|
|
|
$
|
0.12
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 28, 2008, total unrecognized compensation cost
adjusted for estimated forfeitures related to unvested stock
options, RSUs, and RSAs, was $144 million,
$46 million, and $1 million, respectively, which is
expected to be recognized over the remaining weighted-average
vesting periods of 2.5 years for stock options,
1.4 years for RSUs, and 0.6 years for RSAs.
Prior to the adoption of SFAS No. 123R, we provided
the pro forma information regarding net income and earnings per
share required by SFAS No. 123. This information was
required to be determined as if we had accounted for our
employee stock options, including shares issued under our ESPP,
granted subsequent to March 31, 1995 under the fair value
method of SFAS No. 123. We generally did not recognize
stock-based compensation expense in our Consolidated Statements
of Income for option grants to our employees for the periods
prior to our adoption of SFAS No. 123R because the
exercise price of options granted was equal to the fair market
value of the underlying common stock on the date of grant. Prior
to April 1, 2006, stock-based compensation expense resulted
primarily from stock options and RSUs assumed in acquisitions
and restricted stock granted to executives. The following table
illustrates the effect on net income and earnings per share as
if we had applied the
99
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
fair value recognition provisions of SFAS No. 123 to
stock-based employee compensation using the Black-Scholes
option-pricing model for the fiscal years ended March 31,
2006:
|
|
|
|
|
|
|
Fiscal
|
|
|
|
2006
|
|
|
|
(In thousands,
|
|
|
|
except per share
|
|
|
|
amounts)
|
|
|
Net income, as reported
|
|
$
|
156,852
|
|
Add: Amortization of deferred stock-based compensation included
in reported net income, net of tax
|
|
|
26,996
|
|
Less: Stock-based employee compensation expense excluded from
reported net income, net of tax
|
|
|
(239,071
|
)(1)
|
|
|
|
|
|
Pro forma net income (loss)
|
|
$
|
(55,223
|
)
|
|
|
|
|
|
Earnings per share basic
|
|
|
|
|
As reported
|
|
$
|
0.16
|
|
Pro forma
|
|
$
|
(0.06
|
)
|
Earnings per share diluted
|
|
|
|
|
As reported
|
|
$
|
0.15
|
|
Pro forma
|
|
$
|
(0.06
|
)
|
|
|
|
(1) |
|
Includes a charge of $18 million resulting from the
inclusion of unamortized expense for ESPP offering periods that
were cancelled as a result of a plan amendment to eliminate the
two-year offering period effective July 1, 2005. |
Prior to the adoption of SFAS No. 123R, we presented
deferred stock-based compensation as a separate component of
Stockholders Equity. In accordance with the provisions of
SFAS No. 123R, on April 1, 2006, we reversed the
balance in deferred stock-based compensation to Capital in
excess of par value in the Consolidated Balance Sheet.
Stock
option activity
The following table summarizes stock option activity for the
year ended March 28, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
of Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value(1)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Outstanding at March 30, 2007
|
|
|
107,318
|
|
|
$
|
17.90
|
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
14,749
|
|
|
|
19.10
|
|
|
|
|
|
|
|
|
|
Assumed in acquisitions
|
|
|
5,117
|
|
|
|
7.87
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(15,715
|
)
|
|
|
9.88
|
|
|
|
|
|
|
|
|
|
Forfeited(2)
|
|
|
(7,302
|
)
|
|
|
18.91
|
|
|
|
|
|
|
|
|
|
Expired(3)
|
|
|
(8,899
|
)
|
|
|
25.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 28, 2008
|
|
|
95,268
|
|
|
$
|
18.08
|
|
|
|
4.66
|
|
|
$
|
225,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 28, 2008
|
|
|
66,389
|
|
|
$
|
17.95
|
|
|
|
4.17
|
|
|
$
|
204,918
|
|
Vested and expected to vest at March 28, 2008
|
|
|
86,526
|
|
|
$
|
18.05
|
|
|
|
4.55
|
|
|
$
|
219,469
|
|
100
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
(1) |
|
Intrinsic value is calculated as the difference between the
market value of Symantecs common stock as of
March 28, 2008 and the exercise price of the option. The
aggregate intrinsic value of options outstanding and exercisable
includes options with an exercise price below $16.82, the
closing price of our common stock on March 28, 2008, as
reported by the NASDAQ Global Select Market. |
|
(2) |
|
Refers to options cancelled before their vest dates. |
|
(3) |
|
Refers to options cancelled on or after their vest dates. |
The weighted-average fair value per share of options granted
during fiscal 2008, 2007 and 2006 including assumed options was
$6.03, $5.06, and $7.81, respectively. The total intrinsic value
of options exercised during fiscal 2008, 2007 and 2006 was
$142 million, $142 million, and $175 million,
respectively.
The following table summarizes RSU activity for the year ended
March 28, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
Aggregate
|
|
|
Remaining
|
|
|
|
Number of
|
|
|
Purchase
|
|
|
Intrinsic
|
|
|
Contractual
|
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
Term
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Outstanding at March 31, 2007
|
|
|
2,946
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
Granted
|
|
|
3,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed in acquisitions
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(806
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 28, 2008
|
|
|
5,129
|
|
|
$
|
|
|
|
$
|
86,284
|
|
|
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at March 28, 2008
|
|
|
3,814
|
|
|
$
|
|
|
|
$
|
64,155
|
|
|
|
0.72
|
|
The weighted-average grant date fair value per share of RSUs
granted during fiscal 2008, 2007, and 2006, including assumed
RSUs was $19.39, $16.53, and $16.94, respectively. The total
fair value of RSUs that vested in fiscal 2008, 2007, and 2006
was $15 million, $2 million, and $5 million,
respectively.
Shares
reserved
As of March 28, 2008, we had reserved the following shares
of authorized but unissued common stock:
|
|
|
|
|
Stock purchase plans
|
|
|
9,828,088
|
|
Stock award plans
|
|
|
54,449
|
|
Employee stock option plans
|
|
|
141,740,626
|
|
|
|
|
|
|
Total
|
|
|
151,623,163
|
|
|
|
|
|
|
Our restructuring costs consist of severance and benefits and
facility and other charges. Severance and benefits generally
include severance, stay-put or one-time bonuses, outplacement
services, health insurance coverage, effects of foreign currency
exchange and legal costs. Facilities and other costs generally
include rent expense less expected sublease income, lease
termination costs, asset abandonment costs and the effects of
foreign currency exchange. Restructuring expenses generally do
not impact a particular reporting segment and are including in
the Other reporting segment.
101
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
2008
Restructuring Plan
In fiscal 2008, management approved and initiated a
restructuring plan to reduce costs, implement management
structure changes and optimize the business structure and
discontinue certain products. Projects within the plan began in
the third quarter of fiscal 2008 and are expected to be
completed by the fourth quarter of fiscal 2009. Charges in
fiscal 2008 related to these events primarily consist of
severance and other benefit costs. Total remaining costs of the
restructuring plan, consisting of severance and benefits and
excess facilities costs, are estimated to range between
approximately $80 million and $110 million.
2007
Restructuring Plans
In fiscal 2007, we entered into restructuring plans to
consolidate facilities and reduce operating costs through
headcount reductions. Charges in fiscal 2008 related to these
events consist of severance and other benefits and excess
facility costs. Employee terminations occurred in the Americas,
EMEA and Asia Pacific. Charges in fiscal 2007 were
$69 million in severance and other benefits. Facilities
charges in fiscal 2007 were not material. As of March 28,
2008, the majority of employees had been terminated and future
severance costs are not expected. The Company consolidated
certain facilities and exited facilities related to earlier
acquisitions. Facility charges in fiscal 2008 primarily relate
to exited facilities located in California. Excess facilities
obligations are expected to be paid through the second quarter
of fiscal 2010. Future costs for exited facilities associated
with these events are not expected to be significant.
Prior
and Acquisition-Related Restructuring Plans
Fiscal Years
2002-2006. In
fiscal 2006, management entered into restructuring plans to
reduce job redundancy in the Americas, Europe and Asia Pacific
and to consolidate certain facilities in Europe and Asia
Pacific. As a result, the Company recognized both severance and
other benefits and excess facilities costs. Charges recognized
in fiscal 2007 and fiscal 2008 related to these plans were not
significant. Charges recognized in fiscal 2006 reflect
$18 million in severance and benefit costs and
$7 million in excess facility costs related to exited
facilities located in Texas and the United Kingdom.
Restructuring liabilities related to these events as of
March 28, 2008 and March 30, 2007 were both
$3 million and are expected to be paid through the fourth
quarter of fiscal 2018.
Acquisition-Related. Restructuring liabilities
related to acquisitions as of March 28, 2008 were
$8 million, consisting primarily of excess facilities
obligations. During fiscal 2008, $7 million in charges for
severance and other benefits, primarily related to the Altiris
acquisition and charges for excess facilities relate to both the
Vontu and Altiris acquisitions. Of the $8 million
restructuring liability, $7 million relates to excess
facilities resulting from the Vontu acquisition and the
restructuring accrual which the Company assumed in our Veritas
acquisition in 2005. Further severance and benefit charges are
not expected to be recognized in future periods. Excess
facilities obligations are expected to be paid through the
second quarter of fiscal 2011 and the first quarter of fiscal
2013 for Altiris and Vontu facilities, respectively. Excess
facilities obligations related to the Veritas restructurings are
expected to be paid through the first quarter of fiscal 2014.
Restructuring liabilities related to acquisitions as of
March 30, 2007 were $6 million, consisting primarily
of excess facilities obligations primarily related to the
Veritas acquisition described above. There were no restructuring
charges related to acquisitions during fiscal 2006 and fiscal
2007 as the amounts were recognized in the purchase price
allocations.
102
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Summary
of Restructuring Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Liabilities
|
|
|
|
|
|
|
|
|
|
Charges,
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
March 30,
|
|
|
Net of
|
|
|
Cash
|
|
|
March 28,
|
|
|
Incurred to
|
|
|
|
2007
|
|
|
Adjustments(1)
|
|
|
Payments
|
|
|
2008
|
|
|
Date
|
|
|
|
(In thousands)
|
|
|
2008 Restructuring Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
$
|
|
|
|
|
41,625
|
|
|
|
(25,288
|
)
|
|
$
|
16,337
|
|
|
$
|
41,625
|
|
Facilities & Other
|
|
|
|
|
|
|
1,283
|
|
|
|
(252
|
)
|
|
|
1,031
|
|
|
|
1,283
|
|
2007 Restructuring Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
45,132
|
|
|
|
16,172
|
|
|
|
(61,284
|
)
|
|
|
20
|
|
|
|
85,172
|
|
Facilities & Other
|
|
|
2,331
|
|
|
|
8,973
|
|
|
|
(8,719
|
)
|
|
|
2,585
|
|
|
|
9,973
|
|
Prior & Acquisition Restructuring Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
43
|
|
|
|
1,536
|
|
|
|
(1,579
|
)
|
|
|
|
|
|
|
32,536
|
|
Facilities & Other
|
|
|
9,338
|
|
|
|
8,111
|
|
|
|
(6,802
|
)
|
|
|
10,647
|
|
|
|
21,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
56,844
|
|
|
|
77,700
|
|
|
|
(103,924
|
)
|
|
$
|
30,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less purchase price adjustments to goodwill:
|
|
|
|
|
|
|
3,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Accrued Expenses
|
|
$
|
52,140
|
|
|
|
|
|
|
|
|
|
|
$
|
24,062
|
|
|
|
|
|
Other long-term liabilities
|
|
|
4,704
|
|
|
|
|
|
|
|
|
|
|
|
6,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,844
|
|
|
|
|
|
|
|
|
|
|
$
|
30,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Total net adjustments for fiscal 2008 of $6 million consist
of an $8 million reversal of severance costs related to the
fiscal 2007 restructuring plans based upon actual headcount
reduction and a $2 million favorable impact of foreign
currency exchange |
103
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
The components of the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
258,432
|
|
|
$
|
136,626
|
|
|
$
|
269,825
|
|
State
|
|
|
48,460
|
|
|
|
4,133
|
|
|
|
49,656
|
|
International
|
|
|
123,297
|
|
|
|
75,310
|
|
|
|
89,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
430,189
|
|
|
|
216,069
|
|
|
|
408,548
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(147,604
|
)
|
|
|
11,410
|
|
|
|
(152,041
|
)
|
State
|
|
|
(28,387
|
)
|
|
|
7,482
|
|
|
|
(26,799
|
)
|
International
|
|
|
(5,525
|
)
|
|
|
(7,719
|
)
|
|
|
(23,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(181,516
|
)
|
|
|
11,173
|
|
|
|
(202,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
248,673
|
|
|
$
|
227,242
|
|
|
$
|
205,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income from international operations was
$458 million, $336 million, and $324 million for
fiscal 2008, 2007, and 2006, respectively.
The difference between our effective income tax rate and the
federal statutory income tax rate as a percentage of income
before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Federal statutory rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
State taxes, net of federal benefit
|
|
|
1.5
|
|
|
|
1.2
|
|
|
|
2.1
|
|
Foreign earnings taxed at less than the federal rate
|
|
|
(0.1
|
)
|
|
|
(2.3
|
)
|
|
|
(3.5
|
)
|
Non-deductible stock-based compensation
|
|
|
0.9
|
|
|
|
2.0
|
|
|
|
|
|
American Jobs Creation Act tax expense on
|
|
|
|
|
|
|
|
|
|
|
|
|
repatriation of foreign earnings
|
|
|
|
|
|
|
|
|
|
|
(5.8
|
)
|
Non-deductible IPR&D
|
|
|
|
|
|
|
|
|
|
|
27.5
|
|
Domestic production activities deduction
|
|
|
(2.0
|
)
|
|
|
(0.3
|
)
|
|
|
(2.0
|
)
|
Contingent penalty accrual
|
|
|
|
|
|
|
1.0
|
|
|
|
1.9
|
|
IRS audit settlement
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
|
|
Other, net
|
|
|
(0.3
|
)
|
|
|
0.6
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35.0
|
%
|
|
|
36.0
|
%
|
|
|
56.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
The principal components of deferred tax assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Tax credit carryforwards
|
|
$
|
29,452
|
|
|
$
|
50,929
|
|
Net operating loss carryforwards of acquired companies
|
|
|
180,095
|
|
|
|
211,888
|
|
Other accruals and reserves not currently tax deductible
|
|
|
148,808
|
|
|
|
61,192
|
|
Deferred revenue
|
|
|
77,161
|
|
|
|
50,499
|
|
Loss on investments not currently tax deductible
|
|
|
15,845
|
|
|
|
16,177
|
|
Book over tax depreciation
|
|
|
18,542
|
|
|
|
1,331
|
|
State income taxes
|
|
|
36,970
|
|
|
|
523
|
|
Convertible debt
|
|
|
162,303
|
|
|
|
201,730
|
|
Other
|
|
|
63,866
|
|
|
|
44,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
733,042
|
|
|
|
638,321
|
|
Valuation allowance
|
|
|
(38,253
|
)
|
|
|
(60,117
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
694,789
|
|
|
|
578,204
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Acquired intangible assets
|
|
|
(474,159
|
)
|
|
|
(565,893
|
)
|
Unremitted earnings of foreign subsidiaries
|
|
|
(190,893
|
)
|
|
|
(163,103
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax (liabilities) assets
|
|
$
|
29,737
|
|
|
$
|
(150,792
|
)
|
|
|
|
|
|
|
|
|
|
Of the $38 million total valuation allowance provided
against our deferred tax assets, approximately $30 million
is attributable to acquisition-related assets, the benefit of
which will reduce goodwill when and if realized. The valuation
allowance decreased by $22 million in fiscal 2008;
$19 million was reclassified to unrecognized tax benefits
within deferred taxes and $3 million was attributable to
acquisition-related assets.
As of March 28, 2008, we have U.S. federal net
operating loss and credit carryforwards attributable to various
acquired companies of approximately $216 million and
$17 million, respectively, which, if not used, will expire
between fiscal 2016 and 2027. These net operating loss
carryforwards are subject to an annual limitation under Internal
Revenue Code § 382, but are expected to be fully
realized. Furthermore, we have U.S. state net operating
loss and credit carryforwards attributable to various acquired
companies of approximately $290 million and
$12 million, respectively, which will expire in various
fiscal years. In addition, we have foreign net operating loss
carryforwards attributable to various acquired foreign companies
of approximately $705 million, which, under current
applicable foreign tax law, can be carried forward indefinitely.
As of March 28, 2008, no provision has been made for
federal or state income taxes on $1.3 billion of cumulative
unremitted earnings of certain of our foreign subsidiaries,
since we plan to indefinitely reinvest these earnings. As of
March 28, 2008, the unrecognized deferred tax liability for
these earnings was $362 million.
In the March 2005 quarter, we repatriated $500 million from
certain of our foreign subsidiaries under provisions of the
American Jobs Creation Act of 2004, or the Jobs Act, enacted in
October 2004. We recorded a tax charge for this repatriation of
$54 million in the March 2005 quarter.
In May 2005, clarifying language was issued by the
U.S. Department of Treasury and the Internal Revenue
Service, or IRS, with respect to the treatment of foreign taxes
paid on the earnings repatriated under the Jobs Act and in
September 2005, additional clarifying language was issued
regarding the treatment of certain deductions
105
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
attributable to the earnings repatriation. As a result of this
clarifying language, we reduced the tax expense attributable to
the repatriation by approximately $21 million in fiscal
2006, which reduced the cumulative tax charge on the
repatriation to $33 million.
The Company adopted the provisions of FASB Interpretation
No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, effective March 31, 2007.
The cumulative effect of adopting FIN 48 was a decrease in
tax reserves of $16 million, resulting in a decrease to
Veritas goodwill of $10 million, an increase of
$5 million to the March 31, 2007 Retained Earnings
balance, and a $1 million increase in Paid in Capital. Upon
adoption, the gross liability for unrecognized tax benefits at
March 31, 2007 was $456 million, exclusive of interest
and penalties.
The aggregate changes in the balance of gross unrecognized tax
benefits were as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Beginning balance as of March 31, 2007 (date of adoption)
|
|
$
|
456,183
|
|
Settlements with tax authorities
|
|
|
(6,680
|
)
|
Lapse of statute of limitations
|
|
|
(6,030
|
)
|
Increases in balances related to tax positions taken during
prior years
|
|
|
40,390
|
|
Decreases in balances related to tax positions taken during
prior years
|
|
|
(6,570
|
)
|
Increases in balances related to tax positions taken during
current year
|
|
|
111,197
|
|
|
|
|
|
|
Balance as of March 28, 2008
|
|
$
|
588,490
|
|
|
|
|
|
|
Of the $132 million of changes in gross unrecognized tax
benefits during the year disclosed above, approximately
$76 million was provided through purchase accounting in
connection with acquisitions made in fiscal 2008. This gross
liability is reduced by offsetting tax benefits associated with
the correlative effects of potential transfer pricing
adjustments, interest deductions, and state income taxes, as
well as payments made to date.
Of the total unrecognized tax benefits at March 28, 2008,
$122 million, if recognized, would favorably affect the
companys effective tax rate while the remaining amounts
would affect goodwill, cumulative translation adjustments and
Additional paid in capital. However, one or more of these
unrecognized tax benefits could be subject to a valuation
allowance if and when recognized in a future period, which could
impact the timing of any related effective tax rate benefit.
Our policy to include interest and penalties related to gross
unrecognized tax benefits within our provision for income taxes
did not change upon the adoption of FIN 48. At
March 28, 2008, before any tax benefits, we had
$122 million of accrued interest and $13 million of
accrued penalties on unrecognized tax benefits. Interest
included in our provision for income taxes was approximately
$32 million for the year ended March 28, 2008. If the
accrued interest and penalties do not ultimately become payable,
amounts accrued will be reduced in the period that such
determination is made, and reflected as a reduction of the
overall income tax provision, to the extent that the interest
expense had been provided through the tax provision, or as a
reduction to Goodwill if it had been recorded through purchase
accounting.
We file income tax returns in the U.S. on a federal basis
and in many U.S. state and foreign jurisdictions. Our two
most significant tax jurisdictions are the U.S. and
Ireland. Our tax filings remain subject to examination by
applicable tax authorities for a certain length of time
following the tax year to which those filings relate. Our 2000
through 2007 tax years remain subject to examination by the IRS
for U.S. federal tax purposes, and our 1995 through 2007
tax years remain subject to examination by the appropriate
governmental agencies for Irish tax purposes. Other significant
jurisdictions include California and Japan. As of March 28,
2008, we are under examination by the IRS, for the Veritas
U.S. federal income taxes for the 2002 through 2005 tax
years.
We continue to monitor the progress of ongoing income tax
controversies and the impact, if any, of the expected tolling of
the statute of limitations in various taxing jurisdictions.
Considering these facts, we do not currently believe there is a
reasonable possibility of any significant change to our total
unrecognized tax benefits within the next twelve months.
106
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
On March 29, 2006, we received a Notice of Deficiency from
the IRS claiming that we owe additional taxes, plus interest and
penalties, for the 2000 and 2001 tax years based on an audit of
Veritas. The incremental tax liability asserted by the IRS was
$867 million, excluding penalties and interest. On
June 26, 2006, we filed a petition with the U.S. Tax
Court protesting the IRS claim for such additional taxes. On
August 30, 2006, the IRS answered our petition and this
issue has been docketed for trial in U.S. Tax Court and is
scheduled to begin on June 30, 2008. 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 has also agreed to waive the assessment of penalties. In a
Motion to Amend filed March 20, 2008, the IRS moved to
change its position on the remaining issue in the case. If
allowed, the IRS new position would decrease the
incremental tax liability for the remaining issue to
approximately $545 million, excluding interest.
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. No
payments will be made on the assessment until the issue is
definitively resolved. If, upon resolution, we are required to
pay an amount in excess of our provision for this matter, the
incremental amounts due would be accounted for principally as
additions to the cost of Veritas purchase price. Any incremental
interest accrued subsequent to the date of the Veritas
acquisition would be recorded as an expense in the period the
matter is resolved.
On September 5, 2006, we executed a closing agreement with
the IRS with respect to the audit of Symantecs 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 is reflected in the September 2006 quarter.
We are as yet unable to confirm our eligibility to claim a lower
tax rate on a distribution made from a Veritas foreign
subsidiary prior to the June 2005 acquisition. The distribution
was intended to be made pursuant to the Jobs Act, and therefore
eligible for a 5.25% effective U.S. federal rate of tax, in
lieu of the 35% statutory rate. We are seeking resolution of
this matter with the IRS. Because we were unable to confirm our
eligibility for the lower tax rate prior to filing the Veritas
tax return in May 2006, we paid $130 million of additional
U.S. taxes. Since this payment relates to the taxability of
foreign earnings that are otherwise the subject of the IRS
assessment, this additional payment reduced the amount of taxes
payable accrued as part of the purchase accounting for
pre-acquisition contingent tax risks.
The accounting treatment related to pre-acquisition unrecognized
tax benefits will change when FAS 141R becomes effective,
which will be in the first quarter of our fiscal year 2010. At
such time, any changes to the recognition or measurement of
unrecognized tax benefits 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 as an increase or decrease
to goodwill.
For a discussion of our pending tax litigation with the Internal
Revenue Service relating to the 2000 and 2001 tax years of
Veritas, see Note 17.
On July 7, 2004, a purported class action complaint
entitled Paul Kuck, et al. v. Veritas Software Corporation,
et al. was filed in the United States District Court for the
District of Delaware. The lawsuit alleges violations of federal
securities laws in connection with Veritas announcement on
July 6, 2004 that it expected results of operations for the
fiscal quarter ended June 30, 2004 to fall below earlier
estimates. The complaint generally seeks an unspecified amount
of damages. Subsequently, additional purported class action
complaints have been filed in Delaware federal court, and, on
March 3, 2005, the Court entered an order consolidating
these actions and appointing lead plaintiffs and counsel. A
consolidated amended complaint (CAC), was filed on
May 27, 2005, expanding the class period from
April 23, 2004 through July 6, 2004. The CAC also
named another officer as a defendant and added allegations that
Veritas and the named officers made false or misleading
statements in press releases and SEC filings regarding the
companys financial results, which allegedly contained
revenue recognized from contracts that were unsigned or lacked
essential terms. The defendants to this matter filed a motion to
dismiss
107
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
the CAC in July 2005; the motion was denied in May 2006. In
April 2008, the parties filed a stipulation of settlement, which
if approved by the Court will resolve the matter. If the
settlement is not completed, an adverse outcome in this matter
could have a material adverse effect on our financial position,
results of operations and cash flows. As of March 28, 2008,
we have recorded an accrual in the amount of $21.5 million
for this matter and, pursuant to the terms of the settlement, we
established a settlement fund of $21.5 million on
May 1, 2008. The loss is reflected in Settlements of
litigation in the Consolidated Statements of Income.
After Veritas announced in January 2003 that it would restate
its financial results as a result of transactions entered into
with AOL Time Warner in September 2000, numerous separate
complaints purporting to be class actions were filed in the
United States District Court for the Northern District of
California alleging that Veritas and some of its officers and
directors violated provisions of the Securities Exchange Act of
1934. The complaints contain varying allegations, including that
Veritas made materially false and misleading statements with
respect to its 2000, 2001 and 2002 financial results included in
its filings with the SEC, press releases and other public
disclosures. A consolidated complaint entitled In Re VERITAS
Software Corporation Securities Litigation was filed by the lead
plaintiff on July 18, 2003. On February 18, 2005, the
parties filed a Stipulation of Settlement in the class action.
On March 18, 2005, the Court entered an order preliminarily
approving the class action settlement. Pursuant to the terms of
the settlement, a $35 million settlement fund was
established on March 25, 2005. Veritas insurance
carriers provided for the entire amount of the settlement fund.
In July 2007, the Court of Appeals vacated the settlement,
finding that the notice of settlement was inadequate. The matter
has been returned to the District Court for further proceedings,
including reissuance of the notice. If the settlement is not
approved, an adverse outcome in this matter could have a
material adverse effect on our financial position, results of
operations and cash flows.
We are also involved in a number of other judicial and
administrative proceedings that are incidental to our business.
Although adverse decisions (or settlements) may occur in one or
more of the cases, it is not possible to estimate the possible
loss or losses from each of these cases. During the fourth
quarter of fiscal 2008, we agreed to settle two such lawsuits,
the net result of which was a gain of $58.5 million
reflected in Settlements of litigation in the Consolidated
statements of Income. The final resolution of these lawsuits,
individually or in the aggregate, is not expected to have a
material adverse effect on our financial condition or results of
operations.
|
|
Note 19.
|
Segment
Information
|
During the March 2008 quarter, we changed our reporting segments
to align with the new operating structure. The new reporting
segment structure is as follows: (i) the Security and Data
Management Group is now known as the Security and Compliance
segment; (ii) the Altiris segment, in its entirety, has
been moved into the Security and Compliance segment;
(iii) the Data Center Management Group is now known as the
Storage and the Server Management segment; and (iv) we have
moved the Backup Exec products to the Storage and Server
Management segment from the Security and Data Management Group.
All reporting segments are managed by the chief operating
decision maker, which is our chief operating officer. Our chief
operating decision maker, manages business operations, evaluates
performance and allocates resources based on the operating
segments net revenues and operating income. The new
business structure more directly aligns the operating segments
with markets and customers, and we believe will establish more
direct lines of reporting responsibilities, speed decision
making, and enhance the ability to pursue strategic growth
opportunities. We revised the business segment information for
prior years to conform to the new presentation. As of
March 28, 2008, we operated in five operating segments:
|
|
|
|
|
Consumer Products. Our Consumer Products
segment focuses on delivering our Internet security, PC tuneup,
and backup products to individual users and home offices.
|
|
|
|
Security and Compliance. Our Security and
Compliance segment focuses on providing large, medium, and
small-sized business with solutions for compliance and security
management, endpoint security, messaging management, and data
protection management software solutions that allow our
customers to secure, provision, backup, and remotely access
their laptops, PCs, mobile devices, and servers.
|
108
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
Storage and Server Management. Our Storage and
Server Management segment focuses on providing enterprise and
large enterprise customers with storage and server management,
data protection, and application performance management
solutions across heterogeneous storage and server platforms.
|
|
|
|
Services. Our Services segment provides
customers with leading IT risk management services and solutions
to manage security, availability, performance and compliance
risks across multi-vendor environments. In addition, our
services including managed security services, consulting,
education, and threat and early warning systems, help customers
optimize and maximize their Symantec technology investments.
|
|
|
|
Other. Our Other segment is comprised of
sunset products and products nearing the end of their life
cycle. It also includes general and administrative expenses;
amortization of acquired product rights, other intangible
assets, and other assets; charges, such as acquired in-process
research and development, stock-based compensation,
restructuring and certain indirect costs that are not charged to
the other operating segments.
|
Our reportable segments are the same as our operating segments.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
There are no intersegment sales. Our chief operating decision
maker evaluates performance based on direct profit or loss from
operations before income taxes not including nonrecurring gains
and losses, foreign exchange gains and losses, and miscellaneous
other income and expenses. Except for goodwill, as disclosed in
Note 7, the majority of our assets are not discretely
identified by segment. The depreciation and amortization of our
property, equipment, and leasehold improvements are allocated
based on headcount, unless specifically identified by segment.
Segment
information
The following table presents a summary of our operating segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage and
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
Security and
|
|
|
Server
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Products
|
|
|
Compliance
|
|
|
Management
|
|
|
Services
|
|
|
Other
|
|
|
Company
|
|
|
|
(In thousands)
|
|
|
Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
1,746,089
|
|
|
$
|
1,630,133
|
|
|
$
|
2,136,307
|
|
|
$
|
359,955
|
|
|
$
|
1,935
|
|
|
$
|
5,874,419
|
|
Operating income (loss)
|
|
|
938,627
|
|
|
|
256,207
|
|
|
|
884,619
|
|
|
|
(26,511
|
)
|
|
|
(1,450,662
|
)
|
|
|
602,280
|
|
Depreciation and amortization expense
|
|
|
6,680
|
|
|
|
26,282
|
|
|
|
59,744
|
|
|
|
10,449
|
|
|
|
720,954
|
|
|
|
824,109
|
|
Fiscal 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
1,590,505
|
|
|
$
|
1,408,906
|
|
|
$
|
1,906,607
|
|
|
$
|
293,226
|
|
|
$
|
122
|
|
|
$
|
5,199,366
|
|
Operating income (loss)
|
|
|
931,989
|
|
|
|
223,374
|
|
|
|
779,573
|
|
|
|
(43,606
|
)
|
|
|
(1,371,588
|
)
|
|
|
519,742
|
|
Depreciation and amortization expense
|
|
|
5,282
|
|
|
|
29,782
|
|
|
|
58,823
|
|
|
|
10,485
|
|
|
|
707,071
|
|
|
|
811,443
|
|
Fiscal 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
1,409,580
|
|
|
$
|
1,303,476
|
|
|
$
|
1,229,091
|
|
|
$
|
201,217
|
|
|
$
|
28
|
|
|
$
|
4,143,392
|
|
Operating income (loss)
|
|
|
950,508
|
|
|
|
225,876
|
|
|
|
410,840
|
|
|
|
(20,450
|
)
|
|
|
(1,292,809
|
)
|
|
|
273,965
|
|
Depreciation and amortization expense
|
|
|
1,480
|
|
|
|
20,661
|
|
|
|
39,519
|
|
|
|
5,493
|
|
|
|
572,663
|
|
|
|
639,816
|
|
Product
revenue information
Net revenues from sales of our Norton Internet Security product
within our Consumer Products segment represented 17%, 18%, and
15% of our total net revenues for fiscal 2008, 2007, and 2006,
respectively.
Net revenues from sales of our endpoint security products within
our Security and Compliance segment represented 16%, 18%, and
23% of our total net revenues during fiscal 2008, 2007, and
2006, respectively.
109
SYMANTEC
CORPORATION
Notes to
Consolidated Financial
Statements (Continued)
Net revenues from sales of our storage and availability
management products within our Storage and Server Management
segment represented 15%, 16%, and 12% of our total revenues
during fiscal 2008, 2007, and 2006, respectively. Net revenue
from sales of our data protection products within our Storage
and Server Management segment represented 19%, 19%, and 15% of
our total revenues during fiscal 2008, 2007, and 2006,
respectively.
Geographical
information
The following table represents revenue amounts reported for
products shipped to customers in the corresponding regions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Net revenues from customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
2,814,444
|
|
|
$
|
2,560,342
|
|
|
$
|
2,046,226
|
|
United Kingdom
|
|
|
729,958
|
|
|
|
542,244
|
|
|
|
425,717
|
|
Other foreign
countries*
|
|
|
2,330,017
|
|
|
|
2,096,780
|
|
|
|
1,671,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,874,419
|
|
|
$
|
5,199,366
|
|
|
$
|
4,143,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
No individual country represented more than 10% of the
respective totals. |
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Long-lived
assets:**
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
802,181
|
|
|
$
|
929,441
|
|
Foreign
countries***
|
|
|
199,569
|
|
|
|
162,799
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,001,750
|
|
|
$
|
1,092,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** |
|
Amounts exclude goodwill and intangible assets. |
|
*** |
|
No individual country represented more than 10% of the
respective totals. |
Significant
customers
Our solutions are used worldwide by individual and enterprise
customers in a wide variety of industries, small and
medium-sized enterprises, as well as various governmental
entities. In fiscal 2008, 2007 and 2006, one distributor, Ingram
Micro, Inc. (Ingram Micro), that accounted for 10%,
11% and 13%, respectively, of our total net revenues. Our
distributor arrangements with Ingram Micro consist of several
non-exclusive, independently negotiated agreements with its
subsidiaries that cover certain 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 was individually responsible for over
10 percent of our total net revenues in each of the last
three fiscal years. In fiscal 2008, 2007 and 2006, one reseller,
Digital River, accounted for 11%, 12% and 11%, respectively, of
our total net revenues.
|
|
Note 20.
|
Subsequent
Events
|
On April 18, 2008, we completed the acquisition of
AppStream Inc., a leading provider of application streaming
technology, an on-demand delivery mechanism that leverages the
power of application virtualization to enable greater
flexibility and control in the use of endpoint assets within a
corporations IT infrastructure. The aggregate purchase
price was approximately $52 million.
110
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cupertino, State of
California, on the 20th day of May, 2008.
SYMANTEC CORPORATION
John W. Thompson,
Chairman and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints John W.
Thompson, James A. Beer and Arthur F. Courville, and each or any
of them, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities to sign any and
all amendments to this report on
Form 10-K
and any other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to
do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact, or his
or their substitute or substitutes, may lawfully do or cause to
be done by virtue hereof. This Power of Attorney may be signed
in several counterparts.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated below.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ John
W. Thompson
John
W. Thompson
|
|
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
|
|
May 20, 2008
|
|
|
|
|
|
/s/ James
A. Beer
James
A. Beer
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
|
May 20, 2008
|
|
|
|
|
|
/s/ George
W. Harrington
George
W. Harrington
|
|
Senior Vice President, Finance and
Chief Accounting Officer
(Principal Accounting Officer)
|
|
May 20, 2008
|
|
|
|
|
|
/s/ Michael
A. Brown
Michael
A. Brown
|
|
Director
|
|
May 20, 2008
|
|
|
|
|
|
/s/ William
T. Coleman III
William
T. Coleman III
|
|
Director
|
|
May 20, 2008
|
|
|
|
|
|
/s/ Frank
E. Dangeard
Frank
E. Dangeard
|
|
Director
|
|
May 20, 2008
|
|
|
|
|
|
Geraldine
B. Laybourne
|
|
Director
|
|
|
111
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ David
L. Mahoney
David
L. Mahoney
|
|
Director
|
|
May 20, 2008
|
|
|
|
|
|
/s/ Robert
S. Miller
Robert
S. Miller
|
|
Director
|
|
May 20, 2008
|
|
|
|
|
|
/s/ George
Reyes
George
Reyes
|
|
Director
|
|
May 20, 2008
|
|
|
|
|
|
/s/ Daniel
Schulman
Daniel
Schulman
|
|
Director
|
|
May 20, 2008
|
|
|
|
|
|
/s/ V.
Paul Unruh
V.
Paul Unruh
|
|
Director
|
|
May 20, 2008
|
112
Schedule II
SYMANTEC
CORPORATION
VALUATION
AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged Against
|
|
|
Charged to
|
|
|
Amount
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
Revenue and to
|
|
|
Other
|
|
|
Written Off
|
|
|
End of
|
|
|
|
of Period
|
|
|
Operating
Expense(4)
|
|
|
Accounts
|
|
|
or Used
|
|
|
Period
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 28, 2008
|
|
$
|
8,391
|
|
|
$
|
1,173
|
|
|
$
|
|
|
|
$
|
(649
|
)
|
|
$
|
8,915
|
|
Year ended March 30, 2007
|
|
|
8,794
|
|
|
|
4,644
|
|
|
|
(1,777
|
)(1)
|
|
|
(3,270
|
)
|
|
|
8,391
|
|
Year ended March 31, 2006
|
|
|
4,668
|
|
|
|
6,786
|
(2)
|
|
|
|
|
|
|
(2,660
|
)
|
|
|
8,794
|
|
Reserve for product returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 28, 2008
|
|
$
|
12,221
|
|
|
$
|
67,635
|
|
|
$
|
|
|
|
$
|
(65,457
|
)
|
|
$
|
14,399
|
|
Year ended March 30, 2007
|
|
|
12,840
|
|
|
|
72,789
|
|
|
|
|
|
|
|
(73,408
|
)
|
|
|
12,221
|
|
Year ended March 31, 2006
|
|
|
4,755
|
|
|
|
98,282
|
|
|
|
|
|
|
|
(90,197
|
)
|
|
|
12,840
|
|
Reserve for rebates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 28, 2008
|
|
$
|
99,857
|
|
|
$
|
220,967
|
|
|
$
|
109,132
|
(3)
|
|
$
|
(348,327
|
)
|
|
$
|
81,629
|
|
Year ended March 30, 2007
|
|
|
64,590
|
|
|
|
196,775
|
|
|
|
105,993
|
(3)
|
|
|
(267,501
|
)
|
|
|
99,857
|
|
Year ended March 31, 2006
|
|
|
50,804
|
|
|
|
177,897
|
|
|
|
67,129
|
(3)
|
|
|
(231,240
|
)
|
|
|
64,590
|
|
|
|
|
(1) |
|
SAB 108 adjustment to fiscal 2007 beginning balance,
charged to Retained earnings. |
|
(2) |
|
Includes balances assumed in connection with our acquisition of
Veritas. |
|
(3) |
|
Balances represent unrecognized customer rebates that will be
amortized within 12 months and are recorded as a reduction
of Deferred revenue. |
|
(4) |
|
Reserve for product returns and Reserve for rebates are charged
against Revenue. |
113
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Herewith
|
|
|
2
|
.01§
|
|
Agreement and Plan of Reorganization dated as of
December 15, 2004 among Symantec Corporation, Carmel
Acquisition Corp., and Veritas Software Corporation
|
|
8-K
|
|
000-17781
|
|
2.01
|
|
12/20/04
|
|
|
|
2
|
.02§
|
|
Agreement and Plan of Merger among Symantec Corporation, Atlas
Merger Corp. and Altiris, Inc. dated January 26, 2007
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
01/29/07
|
|
|
|
3
|
.01
|
|
Amended and Restated Certificate of Incorporation of Symantec
Corporation
|
|
S-8
|
|
333-119872
|
|
4.01
|
|
10/21/04
|
|
|
|
3
|
.02
|
|
Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Symantec Corporation
|
|
S-8
|
|
333-126403
|
|
4.03
|
|
07/06/05
|
|
|
|
3
|
.03
|
|
Certificate of Designations of Series A Junior
Participating Preferred Stock of Symantec Corporation
|
|
8-K
|
|
000-17781
|
|
3.01
|
|
12/21/04
|
|
|
|
3
|
.04
|
|
Bylaws of Symantec Corporation
|
|
8-K
|
|
000-17781
|
|
3.01
|
|
01/23/06
|
|
|
|
4
|
.01
|
|
Form of Common Stock Certificate
|
|
S-3ASR
|
|
333-139230
|
|
4.07
|
|
12/11/06
|
|
|
|
4
|
.02
|
|
Rights Agreement, dated as of August 12, 1998, between
Symantec Corporation and BankBoston, N.A., as Rights Agent,
which includes as Exhibit A, the Form of Certificate of
Designations of Series A Junior Participating Preferred
Stock, as Exhibit B, the Form of Right Certificate, and as
Exhibit C, the Summary of Rights to Purchase Preferred
Shares
|
|
8-A
|
|
000-17781
|
|
4.1
|
|
08/19/98
|
|
|
|
4
|
.03
|
|
Indenture related to the 0.75% Convertible Senior Notes,
due 2011, dated as of June 16, 2006, between Symantec
Corporation and U.S. Bank National Association, as trustee
(including form of 0.75% Convertible Senior Notes due 2011)
|
|
8-K
|
|
000-17781
|
|
4.01
|
|
06/16/06
|
|
|
|
4
|
.04
|
|
Indenture related to the 1.00% Convertible Senior Notes,
due 2013, dated as of June 16, 2006, between Symantec
Corporation and U.S. Bank National Association, as trustee
(including form of 1.00% Convertible Senior Notes due 2013)
|
|
8-K
|
|
000-17781
|
|
4.02
|
|
06/16/06
|
|
|
|
4
|
.05
|
|
Registration Rights Agreement, dated as of June 16, 2006,
among Symantec Corporation and Citigroup Global Markets, Inc.,
Morgan Stanley & Co. Incorporated and UBS Securities
LLC, for themselves and the other Initial Purchasers
|
|
8-K
|
|
000-17781
|
|
4.03
|
|
06/16/06
|
|
|
|
4
|
.06
|
|
Form of Master Terms and Conditions For Convertible Bond Hedging
Transactions between Symantec Corporation and each of Bank of
America, N.A. and Citibank, N.A., respectively, dated
June 9, 2006, including Exhibit and Schedule thereto
|
|
10-Q
|
|
000-17781
|
|
10.04
|
|
08/09/06
|
|
|
|
4
|
.07
|
|
Form of Master Terms and Conditions For Warrants Issued by
Symantec Corporation between Symantec Corporation and each of
Bank of America, N.A. and Citibank, N.A., respectively, dated
June 9, 2006, including Exhibit and Schedule thereto
|
|
10-Q
|
|
000-17781
|
|
10.05
|
|
08/09/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Herewith
|
|
|
4
|
.08
|
|
Credit Agreement, dated as of July 12, 2006, by and among
Symantec Corporation, the lenders party thereto (the
Lenders), JPMorgan Chase Bank, National Association,
as Administrative Agent, Citicorp USA, Inc., as Syndication
Agent, Bank of America, N.A., Morgan Stanley Bank and UBS Loan
Finance LLC, as Co-Documentation Agents, and J.P. Morgan
Securities Inc. and Citigroup Global Markets Inc., as Joint
Bookrunners and Joint Lead Arrangers, and related agreements.
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
12/03/07
|
|
|
|
10
|
.01*
|
|
Form of Indemnification Agreement with Officers and Directors,
as amended (form for agreements entered into prior to
January 17, 2006)
|
|
S-1
|
|
33-28655
|
|
10.17
|
|
06/21/89
|
|
|
|
10
|
.02*
|
|
Form of Indemnification Agreement for Officers, Directors and
Key Employees
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
01/23/06
|
|
|
|
10
|
.03*
|
|
Veritas Software Corporation 1993 Equity Incentive Plan,
including form of Stock Option Agreement
|
|
10-K
|
|
000-17781
|
|
10.03
|
|
06/09/06
|
|
|
|
10
|
.04*
|
|
Veritas Software Corporation 1993 Directors Stock Option
Plan, including form of Stock Option Agreement
|
|
10-K
|
|
000-17781
|
|
10.04
|
|
06/09/06
|
|
|
|
10
|
.05*
|
|
Symantec Corporation 1996 Equity Incentive Plan, as amended,
including form of Stock Option Agreement and form of Restricted
Stock Purchase Agreement
|
|
10-K
|
|
000-17781
|
|
10.05
|
|
06/09/06
|
|
|
|
10
|
.06*
|
|
Symantec Corporation Deferred Compensation Plan, as adopted
November 7, 1996
|
|
10-K
|
|
000-17781
|
|
10.11
|
|
06/24/97
|
|
|
|
10
|
.07*
|
|
Symantec Corporation 1998 Employee Stock Purchase Plan, as
amended
|
|
10-K
|
|
000-17781
|
|
10.07
|
|
06/09/06
|
|
|
|
10
|
.08*
|
|
Brightmail Inc. 1998 Stock Option Plan, including form of Stock
Option Agreement and form of Notice of Assumption
|
|
10-K
|
|
000-17781
|
|
10.08
|
|
06/09/06
|
|
|
|
10
|
.09*
|
|
Altiris, Inc. 1998 Stock Option Plan
|
|
S-8
|
|
333-141986
|
|
99.01
|
|
04/10/07
|
|
|
|
10
|
.10*
|
|
Form of Notice of Grant of Stock Option under the Altiris, Inc.
1998 Stock Option Plan
|
|
S-8
|
|
333-141986
|
|
99.02
|
|
04/10/07
|
|
|
|
10
|
.11*
|
|
Symantec Corporation 2000 Director Equity Incentive Plan,
as amended
|
|
10-Q
|
|
000-17781
|
|
10.01
|
|
11/05/07
|
|
|
|
10
|
.12*
|
|
Symantec Corporation 2001 Non- Qualified Equity Incentive Plan
|
|
10-K
|
|
000-17781
|
|
10.12
|
|
06/09/06
|
|
|
|
10
|
.13*
|
|
Amended and Restated Symantec Corporation 2002 Executive
Officers Stock Purchase Plan
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
01/25/08
|
|
|
|
10
|
.14*
|
|
Veritas Software Corporation 2002 Directors Stock Option
Plan, including form of Stock Option Agreement and forms of
Notice of Stock Option Grant
|
|
10-K
|
|
000-17781
|
|
10.14
|
|
06/09/06
|
|
|
|
10
|
.15*
|
|
Altiris, Inc. 2002 Stock Plan
|
|
S-8
|
|
333-141986
|
|
99.03
|
|
04/10/07
|
|
|
|
10
|
.16*
|
|
Form of Stock Option Agreement under the Altiris, Inc. 2002
Stock Plan
|
|
S-8
|
|
333-141986
|
|
99.04
|
|
04/10/07
|
|
|
|
10
|
.17*
|
|
Vontu, Inc. 2002 Stock Option/Stock Issuance Plan, as amended
|
|
S-8
|
|
333-148107
|
|
99.02
|
|
12/17/07
|
|
|
|
10
|
.18*
|
|
Form of Vontu, Inc. Stock Option Agreement
|
|
S-8
|
|
333-148107
|
|
99.03
|
|
12/17/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Herewith
|
|
|
10
|
.19*
|
|
Veritas Software Corporation 2003 Stock Incentive Plan, as
amended and restated, including form of Stock Option Agreement,
form of Stock Option Agreement for Executives and Senior VPs and
form of Notice of Stock Option Assumption
|
|
10-K
|
|
000-17781
|
|
10.15
|
|
06/09/06
|
|
|
|
10
|
.20*
|
|
Symantec Corporation 2004 Equity Incentive Plan, as amended,
including Stock Option Grant Terms and Conditions,
form of RSU Award Agreement, and form of RSU Award Agreement for
Non-Employee Directors
|
|
10-K
|
|
000-17781
|
|
10.18
|
|
05/24/07
|
|
|
|
10
|
.21*
|
|
Altiris, Inc. 2005 Stock Plan
|
|
S-8
|
|
333-141986
|
|
99.05
|
|
04/10/07
|
|
|
|
10
|
.22*
|
|
Form of Incentive Stock Option Agreement under the Altiris, Inc.
2005 Stock Plan, as amended
|
|
S-8
|
|
333-141986
|
|
99.06
|
|
04/10/07
|
|
|
|
10
|
.23*
|
|
Offer Letter, dated February 8, 2006, from Symantec
Corporation to James A. Beer
|
|
10-K
|
|
000-17781
|
|
10.17
|
|
06/09/06
|
|
|
|
10
|
.24*
|
|
Separation and Release Agreement dated November 5, 2007 (as
amended on December 7, 2007), between Symantec Corporation
and Kristof Hagerman
|
|
8-K
|
|
000-17781
|
|
10.01
|
|
12/14/07
|
|
|
|
10
|
.25*
|
|
Employment Agreement, dated December 15, 2004, between
Symantec Corporation and Kris Hagerman, as amended
|
|
S-4/A
|
|
333-122724
|
|
10.07
|
|
05/18/05
|
|
|
|
10
|
.26*
|
|
Offer Letter, dated January 12, 2004, from Symantec
Corporation to Thomas W. Kendra
|
|
10-Q
|
|
000-17781
|
|
10.01
|
|
02/04/05
|
|
|
|
10
|
.27*
|
|
Employment Agreement, dated April 11, 1999, between
Symantec Corporation and John W. Thompson
|
|
10-K
|
|
000-17781
|
|
10.67
|
|
07/01/99
|
|
|
|
10
|
.28*
|
|
FY08 Long Term Incentive Plan
|
|
10-Q
|
|
000-17781
|
|
10.04
|
|
08/07/07
|
|
|
|
10
|
.29*
|
|
Form of FY08 Executive Annual Incentive Plan Group
Presidents responsible for one of Symantecs business
segments
|
|
10-Q
|
|
000-17781
|
|
10.03
|
|
08/07/07
|
|
|
|
10
|
.30*
|
|
Form of FY08 Executive Annual Incentive Plan
Executive Officers other than Group Presidents responsible for
one of Symantecs business segments
|
|
8-K
|
|
000-17781
|
|
10.02
|
|
05/07/07
|
|
|
|
10
|
.31*
|
|
Symantec Senior Executive Incentive Plan
|
|
10-K
|
|
000-17781
|
|
10.18
|
|
06/14/04
|
|
|
|
10
|
.32*
|
|
Symantec Executive Retention Plan, as amended
|
|
10-Q
|
|
000-17781
|
|
10.05
|
|
08/07/07
|
|
|
|
10
|
.33
|
|
Second Amended and Restated Symantec Online Store Agreement, by
and among Symantec Corporation, Symantec Limited, Digital River,
Inc. and Digital River Ireland Limited, entered into on
October 19, 2006
|
|
10-Q
|
|
000-17781
|
|
10.02
|
|
02/07/07
|
|
|
|
10
|
.34
|
|
Amendment, dated June 20, 2007, to the Amended and Restated
Agreement Respecting Certain Rights of Publicity dated as of
August 31, 1990, by and between Peter Norton and Symantec
Corporation
|
|
10-Q
|
|
000-17781
|
|
10.01
|
|
08/07/07
|
|
|
|
10
|
.35
|
|
Assignment of Copyright and Other Intellectual Property Rights,
by and between Peter Norton and Peter Norton Computing, Inc.,
dated August 31, 1990
|
|
S-4
|
|
33-35385
|
|
10.37
|
|
06/13/90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Herewith
|
|
|
10
|
.36
|
|
Environmental Indemnity Agreement, dated April 23, 1999,
between Veritas and Fairchild Semiconductor Corporation,
included as Exhibit C to that certain Agreement of Purchase
and Sale, dated March 29, 1999, between Veritas and
Fairchild Semiconductor of California
|
|
S-1/A
|
|
333-83777
|
|
10.27
Exhibit C
|
|
08/06/99
|
|
|
|
21
|
.01
|
|
Subsidiaries of Symantec Corporation
|
|
|
|
|
|
|
|
|
|
X
|
|
23
|
.01
|
|
Consent of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
X
|
|
24
|
.01
|
|
Power of Attorney (see Signature page to this annual report)
|
|
|
|
|
|
|
|
|
|
X
|
|
31
|
.01
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
|
31
|
.02
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
|
32
|
.01
|
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
|
32
|
.02
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
§ |
|
The exhibits and schedules to this agreement have been omitted
pursuant to Item 601(b)(2) of
Regulation S-K.
We will furnish copies of any of the exhibits and schedules to
the SEC upon request. |
|
* |
|
Indicates a management contract, compensatory plan or
arrangement. |
|
|
|
Certain portions of this exhibit have been omitted and have been
filed separately with the SEC pursuant to a request for
confidential treatment under
Rule 24b-2
as promulgated under the Securities Exchange Act of 1934. |
|
|
|
Filed by Veritas Software Corporation. |
|
|
|
This exhibit is being furnished, rather than filed, and shall
not be deemed incorporated by reference into any filing, in
accordance with Item 601 of
Regulation S-K. |
(c) Financial Statement Schedules: We hereby file, as part
of this annual report, the schedule listed in Item 15(a)2,
as set forth above.