e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended
October 3, 2008
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or
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o
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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
(Address of principal
executive offices)
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95014-2132
(Zip Code)
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Registrants telephone number, including area code:
(408) 517-8000
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant 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):
þ Large
accelerated
filer o Accelerated
filer o Non-accelerated
filer o Smaller
reporting company
(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
Shares of Symantec common stock, $0.01 par value per share,
outstanding as of October 31, 2008: 836,013,435 shares.
SYMANTEC
CORPORATION
FORM 10-Q
Quarterly
Period Ended October 3, 2008
TABLE OF
CONTENTS
2
PART I.
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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SYMANTEC
CORPORATION
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October 3,
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March 28,
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|
2008
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|
2008
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(Unaudited)
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*
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(In thousands)
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ASSETS
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Current assets:
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|
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|
|
|
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Cash and cash equivalents
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$
|
2,262,157
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$
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1,890,225
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Short-term investments
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42,485
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536,728
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Trade accounts receivable, net
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645,179
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758,200
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Inventories
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|
|
26,590
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|
|
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34,138
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Deferred income taxes
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|
196,273
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|
193,775
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Other current assets
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258,495
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316,852
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Total current assets
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3,431,179
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3,729,918
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Property and equipment, net
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942,754
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1,001,750
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Acquired product rights, net
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526,143
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648,950
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Other intangible assets, net
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1,141,443
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1,243,524
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Goodwill
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11,323,506
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11,207,357
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Investment in joint venture
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133,073
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|
150,000
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Other long-term assets
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65,120
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|
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|
55,291
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Long-term deferred income taxes
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|
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58,781
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|
|
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55,304
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|
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|
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|
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Total assets
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|
$
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17,621,999
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|
$
|
18,092,094
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable
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$
|
210,027
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|
|
$
|
169,631
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Accrued compensation and benefits
|
|
|
344,051
|
|
|
|
431,345
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Current deferred revenue
|
|
|
2,337,237
|
|
|
|
2,661,515
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Income taxes payable
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|
|
50,196
|
|
|
|
72,263
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Short-term borrowing
|
|
|
|
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200,000
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Other current liabilities
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|
228,906
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|
|
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264,832
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|
|
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|
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Total current liabilities
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3,170,417
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3,799,586
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Convertible senior notes
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2,100,000
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2,100,000
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Long-term deferred revenue
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|
375,989
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|
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415,054
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Long-term deferred tax liabilities
|
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|
194,728
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|
|
|
219,341
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Long-term income taxes payable
|
|
|
491,612
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|
|
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478,743
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Other long-term liabilities
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95,961
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|
|
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106,187
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|
|
|
|
|
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Total liabilities
|
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|
6,428,707
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|
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7,118,911
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Commitments and contingencies
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Stockholders equity:
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Preferred stock
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Common stock
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8,357
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8,393
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Additional paid-in capital
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9,121,142
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9,139,084
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Accumulated other comprehensive income
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182,580
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|
159,792
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Retained earnings
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|
1,881,213
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1,665,914
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Total stockholders equity
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11,193,292
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10,973,183
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Total liabilities and stockholders equity
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$
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17,621,999
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$
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18,092,094
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* |
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Derived from audited financials |
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these financial statements.
3
SYMANTEC
CORPORATION
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Three Months Ended
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Six Months Ended
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October 3,
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September 28,
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October 3,
|
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September 28,
|
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2008
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2007
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2008
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2007
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(Unaudited)
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(In thousands, except earnings per share data)
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Net revenues:
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|
|
|
|
|
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|
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|
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Content, subscriptions, and maintenance
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$
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1,180,715
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$
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1,117,165
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$
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2,471,707
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$
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2,203,683
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Licenses
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|
337,295
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|
|
301,924
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696,625
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615,744
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Total net revenues
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|
1,518,010
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|
|
|
1,419,089
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3,168,332
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2,819,427
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Cost of revenues:
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|
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Content, subscriptions, and maintenance
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212,070
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205,572
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430,644
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415,238
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Licenses
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|
10,398
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|
|
|
9,892
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|
|
|
18,845
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|
|
21,130
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Amortization of acquired product rights
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|
86,602
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89,062
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171,563
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178,422
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|
|
|
|
|
|
|
|
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|
|
|
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|
|
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Total cost of revenues
|
|
|
309,070
|
|
|
|
304,526
|
|
|
|
621,052
|
|
|
|
614,790
|
|
|
|
|
|
|
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|
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|
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Gross profit
|
|
|
1,208,940
|
|
|
|
1,114,563
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|
|
|
2,547,280
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|
2,204,637
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|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
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Sales and marketing
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|
596,983
|
|
|
|
595,162
|
|
|
|
1,259,802
|
|
|
|
1,163,692
|
|
Research and development
|
|
|
219,049
|
|
|
|
221,057
|
|
|
|
450,484
|
|
|
|
446,635
|
|
General and administrative
|
|
|
84,838
|
|
|
|
86,405
|
|
|
|
177,604
|
|
|
|
172,250
|
|
Amortization of other purchased intangible assets
|
|
|
55,651
|
|
|
|
56,926
|
|
|
|
111,030
|
|
|
|
113,851
|
|
Restructuring
|
|
|
9,790
|
|
|
|
9,578
|
|
|
|
26,795
|
|
|
|
28,578
|
|
Impairment of assets
|
|
|
26,204
|
|
|
|
86,546
|
|
|
|
26,204
|
|
|
|
86,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
992,515
|
|
|
|
1,055,674
|
|
|
|
2,051,919
|
|
|
|
2,011,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
216,425
|
|
|
|
58,889
|
|
|
|
495,361
|
|
|
|
193,085
|
|
Interest income
|
|
|
12,302
|
|
|
|
19,179
|
|
|
|
30,290
|
|
|
|
40,000
|
|
Interest expense
|
|
|
(6,712
|
)
|
|
|
(6,617
|
)
|
|
|
(16,281
|
)
|
|
|
(12,908
|
)
|
Other income (expense), net
|
|
|
(8,782
|
)
|
|
|
1,965
|
|
|
|
(8,843
|
)
|
|
|
3,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and loss from joint venture
|
|
|
213,233
|
|
|
|
73,416
|
|
|
|
500,527
|
|
|
|
223,408
|
|
Provision for income taxes
|
|
|
62,414
|
|
|
|
23,048
|
|
|
|
156,835
|
|
|
|
77,834
|
|
Loss from joint venture
|
|
|
10,746
|
|
|
|
|
|
|
|
16,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
140,073
|
|
|
$
|
50,368
|
|
|
$
|
326,765
|
|
|
$
|
145,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$
|
0.17
|
|
|
$
|
0.06
|
|
|
$
|
0.39
|
|
|
$
|
0.16
|
|
Earnings per share diluted
|
|
$
|
0.16
|
|
|
$
|
0.06
|
|
|
$
|
0.38
|
|
|
$
|
0.16
|
|
Weighted-average shares outstanding basic
|
|
|
838,489
|
|
|
|
875,662
|
|
|
|
838,537
|
|
|
|
883,652
|
|
Weighted-average shares outstanding diluted
|
|
|
852,334
|
|
|
|
892,759
|
|
|
|
853,174
|
|
|
|
901,683
|
|
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these financial statements.
4
SYMANTEC
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
326,765
|
|
|
$
|
145,574
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
411,567
|
|
|
|
417,493
|
|
Stock-based compensation expense
|
|
|
89,495
|
|
|
|
81,734
|
|
Impairment of assets
|
|
|
25,870
|
|
|
|
86,546
|
|
Deferred income taxes
|
|
|
(917
|
)
|
|
|
(103,900
|
)
|
Income tax benefit from the exercise of stock options
|
|
|
17,929
|
|
|
|
17,268
|
|
Excess income tax benefit from the exercise of stock options
|
|
|
(16,007
|
)
|
|
|
(13,529
|
)
|
Loss from joint venture
|
|
|
16,927
|
|
|
|
|
|
Realized and other than temporary impairment loss on investments
|
|
|
2,330
|
|
|
|
|
|
Other
|
|
|
11,235
|
|
|
|
3,076
|
|
Net change in assets and liabilities, excluding effects of
acquisitions:
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
99,884
|
|
|
|
118,986
|
|
Inventories
|
|
|
5,945
|
|
|
|
10,497
|
|
Accounts payable
|
|
|
(986
|
)
|
|
|
7,647
|
|
Accrued compensation and benefits
|
|
|
(81,905
|
)
|
|
|
(418
|
)
|
Deferred revenue
|
|
|
(228,632
|
)
|
|
|
(229,013
|
)
|
Income taxes payable
|
|
|
(51,477
|
)
|
|
|
131,436
|
|
Other assets
|
|
|
72,683
|
|
|
|
50,404
|
|
Other liabilities
|
|
|
(38,839
|
)
|
|
|
(41,523
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
661,867
|
|
|
|
682,278
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(125,339
|
)
|
|
|
(138,029
|
)
|
Proceeds from sales of property and equipment
|
|
|
39,547
|
|
|
|
|
|
Cash payments for business acquisitions, net of cash and cash
equivalents acquired
|
|
|
(186,826
|
)
|
|
|
(852,286
|
)
|
Purchases of
available-for-sale
securities
|
|
|
(172,891
|
)
|
|
|
(640,570
|
)
|
Proceeds from sales of
available-for-sale
securities
|
|
|
667,693
|
|
|
|
498,386
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
222,184
|
|
|
|
(1,132,499
|
)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(399,894
|
)
|
|
|
(899,984
|
)
|
Net proceeds from sales of common stock under employee stock
benefit plans
|
|
|
185,537
|
|
|
|
130,220
|
|
Repayment of short-term borrowing
|
|
|
(200,000
|
)
|
|
|
|
|
Excess income tax benefit from the exercise of stock options
|
|
|
16,007
|
|
|
|
13,529
|
|
Repayment of other long-term liability
|
|
|
(3,716
|
)
|
|
|
(7,604
|
)
|
Tax payments related to restricted stock issuance
|
|
|
(14,830
|
)
|
|
|
(3,050
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(416,896
|
)
|
|
|
(766,889
|
)
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
(95,223
|
)
|
|
|
46,440
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
371,932
|
|
|
|
(1,170,670
|
)
|
Beginning cash and cash equivalents
|
|
|
1,890,225
|
|
|
|
2,559,034
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents
|
|
$
|
2,262,157
|
|
|
$
|
1,388,364
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these financial statements.
5
SYMANTEC
CORPORATION
(Unaudited)
|
|
Note 1.
|
Basis of
Presentation
|
The condensed consolidated financial statements of Symantec
Corporation (we, us, and our
refer to Symantec Corporation and all of its subsidiaries) as of
October 3, 2008 and March 28, 2008 and for the three
and six months ended October 3, 2008 and September 28,
2007 have been prepared in accordance with the instructions for
Form 10-Q
pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) and, therefore, do not
include all information and notes normally provided in audited
financial statements. In the opinion of management, the
condensed consolidated financial statements contain all
adjustments, consisting only of normal recurring items, except
as otherwise noted, necessary for the fair presentation of our
financial position and results of operations for the interim
periods. The condensed consolidated balance sheet as of
March 28, 2008 has been derived from the audited
consolidated financial statements, however it does not include
all disclosures required by generally accepted accounting
principles. These condensed consolidated financial statements
should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in our Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008. The results of
operations for the three and six months ended October 3,
2008 are not necessarily indicative of the results to be
expected for the entire fiscal year. All significant
intercompany accounts and transactions have been eliminated.
We have a 52/53-week fiscal accounting year. Unless otherwise
stated, references to three and six months ended in this report
relate to fiscal periods ended October 3, 2008 and
September 28, 2007. The three months ended October 3,
2008 and September 28, 2007 both consisted of
13 weeks. The six months ended October 3, 2008
consisted of 27 weeks while the six months ended
September 28, 2007 consisted of 26 weeks.
Significant
accounting policies
Effective July 4, 2008, we adopted Financial Accounting
Standards Board (FASB) Statement of Financial
Accounting Standards No. 157
(SFAS No. 157). Fair Value Measurements
for all of our financial assets and liabilities are recognized
or disclosed at fair value on a recurring and nonrecurring basis
(FASB Staff Position (FSP). FAS No
157-1
eliminates leasing transactions from scope and FSP
FAS No. 157-2
defers the effective date for one year for nonfinancial assets
and liabilities measured at fair value on a nonrecurring basis).
See Note 2 of the Notes to the Condensed Consolidated
Financial Statements for further discussion.
Other than this change, there have been no changes in our
significant accounting policies during the six months ended
October 3, 2008 as compared to the significant accounting
policies described in our Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008.
Recent
accounting pronouncements
In June 2008, the FASB issued Emerging Issues Task Force
(EITF) Issue
No. 07-5,
Determining Whether an Instrument (or an Embedded Feature) Is
Indexed to an Entitys Own Stock. EITF Issue
No. 07-5
provides guidance on evaluating whether an equity-linked
financial instrument (or embedded feature) is indexed to the
companys own stock, including evaluating the
instruments contingent exercise and settlement provisions.
EITF Issue
No. 07-5
is effective for fiscal years beginning after December 15,
2008. We are currently assessing the impact of EITF Issue
No. 07-5
on our consolidated financial statements.
In May 2008, the FASB issued FSP Accounting Principles Board
(APB)
No. 14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). The FSP will require the issuer of convertible
debt instruments with cash settlement features to separately
account for the liability and equity components of the
instrument. The debt will be recognized at the present value of
its cash flows discounted using the issuers nonconvertible
debt borrowing rate at the time of issuance. The equity
component will be recognized as the difference between the
proceeds from the issuance of the note and the fair value of the
liability. The FSP will also require an accretion as interest
expense of the resultant debt discount over
6
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the expected life of the debt. The transition guidance requires
retrospective application to all periods presented, and does not
grandfather existing instruments. The guidance will be effective
for fiscal years beginning after December 15, 2008, and
interim periods within those years. Upon adoption of the FSP, we
expect the increase in non-cash interest expense recognized on
our consolidated financial statements to be significant.
In April 2008, the FASB issued 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 Standards (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 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 do not
expect the adoption of FSP
No. 142-3
to have a material impact 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
do not expect the adoption of SFAS No. 161 to have a
material impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements, an amendment of Accounting Research Bulletin
(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 a 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. 141R,
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 the acquisition date fair value, the
recording of acquired contingent liabilities at acquisition date
fair value and the subsequent re-measurement of such liabilities
after acquisition date, the recognition of capitalized
in-process research and development, the accounting for
acquisition-related restructuring cost accruals subsequent to
the acquisition date, and the recognition of changes in the
acquirers income tax valuation allowance.
SFAS No. 141R is effective for fiscal years beginning
after December 15, 2008, with early adoption prohibited. If
the current level of acquisitions activity continues, we expect
the implementation of SFAS No. 141R to have a material
impact on our consolidated financial statements when it becomes
effective. The accounting treatment related to pre-acquisition
uncertain tax positions will change when SFAS No. 141R
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.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements, which defines fair value,
establishes guidelines for measuring fair value and expands
disclosures regarding fair value measurements.
SFAS No. 157 does not require any new fair value
measurements but rather eliminates inconsistencies in guidance
found in various prior accounting pronouncements and is
effective for fiscal years beginning after November 15,
2007. In February 2008, the FASB issued FSP
No. 157-2,
The Effective Date of FASB Statement No. 157, which
7
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
delays the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), until
fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years. These nonfinancial items
include assets and liabilities such as reporting units measured
at fair value in a goodwill impairment test and nonfinancial
assets acquired and liabilities assumed in a business
combination. Effective March 29, 2008, we adopted
SFAS 157 for financial assets and liabilities recognized at
fair value on a recurring basis. The partial adoption of
SFAS 157 for financial assets and liabilities did not have
a material impact on our consolidated financial position,
results of operations or cash flows. In October 2008, the FASB
issued FSP
No. FAS 157-3,
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active. FSP
No. FAS 157-3
provides examples to illustrate key considerations in
determining the fair value of a financial asset when the market
for that financial asset is not active. FSP
No. FAS 157-3
is effective upon issuance. We do not expect the adoption of the
FSP to have a material impact on our consolidated financial
statements. See Note 2 for information and related
disclosures regarding our fair value measurements.
|
|
Note 2.
|
Financial
Instruments
|
We measure financial assets and liabilities at fair value based
upon exit price, representing the amount that would be received
on the sale of an asset or paid to transfer a liability, as the
case may be, in an orderly transaction between market
participants. As such, fair value may be based on assumptions
that market participants would use in pricing an asset or
liability. SFAS No. 157 (as impacted by FSP Nos.
157-1,
157-2 and
157-3)
establishes a consistent framework for measuring fair value on
either a recurring or nonrecurring basis whereby inputs, used in
valuation techniques, are assigned a hierarchical level. The
following are the hierarchical levels of inputs to measure fair
value:
|
|
|
|
|
Level 1: Observable inputs that reflect
quoted prices (unadjusted) for identical assets or liabilities
in active markets.
|
|
|
|
Level 2: Inputs reflect quoted prices for
identical assets or liabilities in markets that are not active;
quoted prices for similar assets or liabilities in active
markets; inputs other than quoted prices that are observable for
the assets or liabilities; or inputs that are derived
principally from or corroborated by observable market data by
correlation or other means.
|
|
|
|
Level 3: Unobservable inputs reflecting
our own assumptions incorporated in valuation techniques used to
determine fair value. These assumptions are required to be
consistent with market participant assumptions that are
reasonably available.
|
8
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the Companys financial
assets and liabilities measured at fair value on a recurring
basis, by level within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 3, 2008
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
403,459
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
403,459
|
|
Bank securities and deposits
|
|
|
|
|
|
|
39,578
|
|
|
|
|
|
|
|
39,578
|
|
Government notes
|
|
|
|
|
|
|
249,964
|
|
|
|
|
|
|
|
249,964
|
|
Commercial paper
|
|
|
|
|
|
|
482,574
|
|
|
|
|
|
|
|
482,574
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities
|
|
|
|
|
|
|
21,985
|
|
|
|
|
|
|
|
21,985
|
|
Corporate notes
|
|
|
|
|
|
|
17,659
|
|
|
|
|
|
|
|
17,659
|
|
Equity investments(1)
|
|
|
2,841
|
|
|
|
|
|
|
|
|
|
|
|
2,841
|
|
Deferred compensation plan assets(2)
|
|
|
|
|
|
|
13,035
|
|
|
|
|
|
|
|
13,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
406,300
|
|
|
$
|
824,795
|
|
|
$
|
|
|
|
$
|
1,231,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Equity investments relate to our investments in the securities
of other public companies. Such investments are included in
Short-term investments. |
|
(2) |
|
Deferred compensation plan assets are fund-of-funds and consist
primarily of corporate equity securities. Such assets are
included in Other current assets. |
Certain financial assets and liabilities are not included in the
table above because they are measured at fair value on a
nonrecurring basis. These assets and liabilities include our
non-public equity investments, convertible senior notes and bond
hedge (including the derivative call option).
The effective date of FSP
FAS No. 157-2
for measuring fair value of nonfinancial assets and liabilities
which are recognized or disclosed at fair value on a
nonrecurring basis is the fiscal year starting April 4,
2009 and interim periods within that fiscal year. This deferral
applies to us for such items as nonfinancial assets and
liabilities initially measured at fair value in a business
combination but not measured at fair value in subsequent
periods, nonfinancial long-lived and intangible asset groups
measured at fair value for an impairment assessment, reporting
units measured at fair value in the first step of a goodwill
impairment test, and nonfinancial restructuring liabilities.
9
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 3.
|
Balance
Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
October 3,
|
|
|
March 28,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Property and equipment, net:
|
|
|
|
|
|
|
|
|
Computer hardware and software
|
|
$
|
979,678
|
|
|
$
|
925,156
|
|
Office furniture and equipment
|
|
|
216,210
|
|
|
|
292,306
|
|
Buildings
|
|
|
417,159
|
|
|
|
492,857
|
|
Leasehold improvements
|
|
|
303,749
|
|
|
|
276,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,916,796
|
|
|
|
1,986,435
|
|
Less: accumulated depreciation and amortization
|
|
|
(1,052,434
|
)
|
|
|
(1,079,468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
864,362
|
|
|
|
906,967
|
|
Land
|
|
|
78,392
|
|
|
|
94,783
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
942,754
|
|
|
$
|
1,001,750
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4.
|
Comprehensive
Income
|
The components of comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
October 3,
|
|
|
September 28,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net income
|
|
$
|
140,073
|
|
|
$
|
50,368
|
|
|
$
|
326,765
|
|
|
$
|
145,574
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment relating to the legal liquidation of
foreign entities
|
|
|
(188
|
)
|
|
|
|
|
|
|
(4,824
|
)
|
|
|
|
|
Change in cumulative translation adjustment, net of tax
|
|
|
25,144
|
|
|
|
4,207
|
|
|
|
28,339
|
|
|
|
12,301
|
|
Change in unrealized gain (loss) on
available-for-sale
securities, net of tax
|
|
|
(1,013
|
)
|
|
|
1,882
|
|
|
|
(727
|
)
|
|
|
580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
|
|
|
23,943
|
|
|
|
6,089
|
|
|
|
22,788
|
|
|
|
12,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
164,016
|
|
|
$
|
56,457
|
|
|
$
|
349,553
|
|
|
$
|
158,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reclassification adjustment relates to the realization of a
foreign exchange translation adjustment relating to the legal
liquidation of foreign entities.
Accumulated other comprehensive income as of October 3,
2008 and March 28, 2008 primarily consisted of foreign
currency translation adjustments, net of taxes.
nSuite
Purchase
On August 8, 2008, we completed the acquisition of nSuite
Technologies, Inc. (nSuite), a Massachusetts-based
provider of connection broker technology. The acquisition
complements our endpoint virtualization portfolio and strategy.
The connection broker technology of nSuite is utilized in an
endpoint virtualization platform to validate users, perform
basic security functions, connect users with the correct
applications and manage the transfer
10
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of virtual resources within the data center. In exchange for all
voting equity interests, we purchased nSuite for
$20 million, which included acquisition related costs. Cash
was used to fund the transaction, and no equity interests were
issued. Of the aggregate purchase price, $5 million was
allocated to identified intangible assets, primarily developed
technology, and the remaining $15 million resulted in
goodwill. Goodwill, all of which was deductible for tax
purposes, resulted primarily from our expectation of synergies
from the integration of nSuites product offerings with our
product offerings. The results of operations for nSuite, since
the date of acquisition, are included as part of the Security
and Compliance segment. Supplemental proforma information for
nSuite is not material and was therefore not included.
AppStream
Purchase
On April 18, 2008, we completed the acquisition of
AppStream, Inc. (AppStream), a Palo Alto,
California-based provider of endpoint virtualization software.
AppStream was acquired to complement our endpoint management and
virtualization portfolio and strategy. AppStreams
application streaming technology provides an on-demand delivery
mechanism that leverages application virtualization to enable
greater flexibility and control. In exchange for all voting
equity interests, we purchased AppStream for $53 million,
which included acquisition related costs. Cash was used to fund
the transaction, and no equity interests were issued. Of the
aggregate purchase price, $15 million was allocated to
tangible assets, $11 million to identified intangible
assets, primarily developed technology, and the remaining
$27 million resulted in goodwill. Goodwill, none of which
was deductible for tax purposes, resulted primarily from our
expectation of synergies from the integration of
AppStreams product offerings with our product offerings.
The results of operations for AppStream, since the date of
acquisition, are included as part of the Security and Compliance
segment. Supplemental proforma information for AppStream is not
material and is therefore not included.
SwapDrive
Purchase
On June 6, 2008, we completed the acquisition of SwapDrive,
Inc. (SwapDrive), a Washington D.C.-based provider
of online storage products. SwapDrive was acquired to strengthen
and expand the Norton consumer portfolio by leveraging online
backup and storage platform technologies. In exchange for all
voting equity interests, we purchased SwapDrive for
$124 million, which included acquisition related costs.
Cash was used to fund the transaction, and no equity interests
were issued. Of the aggregate purchase price, $6 million
was allocated to tangible assets and $40 million was
allocated to identified intangible assets, primarily developed
technology and customer relationships, and the remaining
$78 million resulted in goodwill. Goodwill resulted
primarily from our expectation of synergies from the integration
of SwapDrives product offerings with our product
offerings. Goodwill is expected to be deductible in the State of
California for tax purposes. The results of operations for
SwapDrive, since the date of acquisition, are included as part
of the Consumer Products segment. Supplemental proforma
information for SwapDrive was not material and is therefore not
included.
|
|
Note 6.
|
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. Huawei
contributed its telecommunications storage and security business
assets, engineering, sales and marketing resources, personnel,
and licenses related to intellectual property in exchange for a
51% ownership interest in the joint venture.
The contribution of assets to the joint venture was accounted
for at its carrying value. The historical carrying value of the
assets contributed by Symantec comprised a significant portion
of the net assets of the joint venture. As
11
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
a result, our carrying value of the investment in the joint
venture exceeded our proportionate share in the underlying net
assets of the joint venture by approximately $73 million
upon formation of the joint venture. As the contributions for
both Symantec and Huawei were recorded at historical carrying
value by the joint venture, this basis difference is
attributable to the contributed identified intangible assets.
The basis difference is being amortized over a weighted-average
period of 9 years, the estimated useful lives of the
underlying identified intangible assets to which the basis
difference is attributed.
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 record our proportionate share of net income or loss
one quarter in arrears. In determining our share of the joint
ventures net income or loss, we adjust the joint
ventures reported results to recognize the amortization
expense associated with the basis difference. For the six months
ended October 3, 2008, we recorded a loss of approximately
$17 million related to our share of the joint
ventures net loss, including the amortization of the basis
difference described above, for the joint ventures period
ended June 30, 2008. This loss is included in the
accompanying Condensed Consolidated Statements of Income under
the caption Loss from joint venture. The carrying
value of our investment in the joint venture as of
October 3, 2008 was approximately $133 million.
Summarized unaudited statement of operations information for the
joint venture and the calculation of our share of the joint
ventures loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period from
|
|
|
|
Three Months Ended
|
|
|
February 5, 2008 to
|
|
|
|
June 30, 2008
|
|
|
June 30, 2008
|
|
|
|
(In thousands)
|
|
|
Net revenues
|
|
$
|
455
|
|
|
$
|
469
|
|
Gross margin
|
|
|
(188
|
)
|
|
|
(386
|
)
|
Net loss, as reported by the joint venture
|
|
$
|
(17,780
|
)
|
|
$
|
(27,598
|
)
|
Symantecs ownership interest
|
|
|
49
|
%
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
Symantecs proportionate share of net loss
|
|
|
(8,712
|
)
|
|
|
(13,523
|
)
|
Adjustment for amortization of basis difference
|
|
|
(2,034
|
)
|
|
|
(3,404
|
)
|
|
|
|
|
|
|
|
|
|
Loss from joint venture
|
|
$
|
(10,746
|
)
|
|
$
|
(16,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
Security and
|
|
|
Storage and Server
|
|
|
|
|
|
Total
|
|
|
|
Products
|
|
|
Compliance
|
|
|
Management
|
|
|
Services
|
|
|
Company
|
|
|
|
(In thousands)
|
|
|
Balance as of March 28, 2008
|
|
$
|
102,810
|
|
|
$
|
4,080,717
|
|
|
$
|
6,665,734
|
|
|
$
|
358,096
|
|
|
$
|
11,207,357
|
|
Goodwill acquired through business combinations(1)
|
|
|
78,421
|
|
|
|
42,929
|
|
|
|
|
|
|
|
|
|
|
|
121,350
|
|
Goodwill adjustments(2)
|
|
|
|
|
|
|
(2,851
|
)
|
|
|
(2,350
|
)
|
|
|
|
|
|
|
(5,201
|
)
|
Operating segment reclassification(3)
|
|
|
|
|
|
|
(84,376
|
)
|
|
|
|
|
|
|
84,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 3, 2008
|
|
$
|
181,231
|
|
|
$
|
4,036,419
|
|
|
$
|
6,663,384
|
|
|
$
|
442,472
|
|
|
$
|
11,323,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(1) |
|
Reflects goodwill of approximately $78 million in the
Consumer Products segment resulting from the SwapDrive
acquisition, and approximately $27 million and
$15 million in the Security and Compliance segment
resulting from the acquisition of AppStream and nSuite
respectively. See Note 5 for further details. |
|
(2) |
|
Reflects adjustments made to goodwill of prior acquisitions as a
result of tax adjustments, primarily related to stock-based
compensation. |
|
(3) |
|
In the first quarter of fiscal year 2009, we moved Altiris
services from the Security and Compliance segment to the
Services segment. As a result of this reclassification, the
above adjustment was made in accordance with SFAS No. 142. |
Goodwill is tested for impairment on an annual basis during the
March quarter, or earlier if indicators of impairment exist.
Based on our review as of October 3, 2008, no indicators of
impairment were identified for our Goodwill, Acquired Product
Rights, or Other Intangible Assets.
Acquired
product rights, net
Acquired product rights subject to amortization are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 3, 2008
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Weighted-Average
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Remaining Life
|
|
|
|
(In thousands)
|
|
|
Developed technology
|
|
$
|
1,705,025
|
|
|
$
|
(1,213,173
|
)
|
|
$
|
491,852
|
|
|
|
2 years
|
|
Patents
|
|
|
75,595
|
|
|
|
(41,304
|
)
|
|
|
34,291
|
|
|
|
3 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,780,620
|
|
|
$
|
(1,254,477
|
)
|
|
$
|
526,143
|
|
|
|
2 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 28, 2008
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Weighted-Average
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Remaining Life
|
|
|
|
(In thousands)
|
|
|
Developed technology
|
|
$
|
1,655,895
|
|
|
$
|
(1,045,383
|
)
|
|
$
|
610,512
|
|
|
|
2 years
|
|
Patents
|
|
|
71,313
|
|
|
|
(32,875
|
)
|
|
|
38,438
|
|
|
|
3 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,727,208
|
|
|
$
|
(1,078,258
|
)
|
|
$
|
648,950
|
|
|
|
2 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended October 3, 2008 and
September 28, 2007, amortization expense for acquired
product rights was $87 million and $89 million,
respectively. During the six months ended October 3, 2008
and September 28, 2007, amortization expense for acquired
product rights was $172 million and $178 million,
respectively. Amortization of acquired product rights is
included in Cost of revenues in the Condensed Consolidated
Statements of Income.
13
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amortization expense for acquired product rights, based upon our
existing acquired product rights and their current useful lives
as of October 3, 2008, is estimated to be as follows (in
thousands):
|
|
|
|
|
Remainder of fiscal 2009
|
|
$
|
173,955
|
|
2010
|
|
|
210,512
|
|
2011
|
|
|
79,657
|
|
2012
|
|
|
37,307
|
|
2013
|
|
|
13,198
|
|
Thereafter
|
|
|
11,514
|
|
|
|
|
|
|
Total
|
|
$
|
526,143
|
|
|
|
|
|
|
Other
intangible assets, net
Other intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 3, 2008
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Weighted-Average
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Remaining Life
|
|
|
(In thousands)
|
|
Customer base
|
|
$
|
1,670,523
|
|
|
$
|
(631,120
|
)
|
|
$
|
1,039,403
|
|
|
5 years
|
Trade name
|
|
|
125,310
|
|
|
|
(45,353
|
)
|
|
|
79,957
|
|
|
7 years
|
Norton tradename
|
|
|
22,083
|
|
|
|
|
|
|
|
22,083
|
|
|
Indefinite
|
Partnership agreements
|
|
|
2,300
|
|
|
|
(2,300
|
)
|
|
|
|
|
|
Fully amortized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,820,216
|
|
|
$
|
(678,773
|
)
|
|
$
|
1,141,443
|
|
|
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 28, 2008
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Weighted-Average
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Remaining Life
|
|
|
(In thousands)
|
|
Customer base
|
|
$
|
1,661,683
|
|
|
$
|
(526,512
|
)
|
|
$
|
1,135,171
|
|
|
5 years
|
Tradename
|
|
|
125,203
|
|
|
|
(38,933
|
)
|
|
|
86,270
|
|
|
7 years
|
Norton tradename
|
|
|
22,083
|
|
|
|
|
|
|
|
22,083
|
|
|
Indefinite
|
Partnership agreements
|
|
|
2,300
|
|
|
|
(2,300
|
)
|
|
|
|
|
|
Fully amortized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,811,269
|
|
|
$
|
(567,745
|
)
|
|
$
|
1,243,524
|
|
|
6 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended October 3, 2008 and
September 28, 2007, amortization expense for other
intangible assets was $56 million and $57 million,
respectively. During the six months ended October 3, 2008
and September 28, 2007, amortization expense for other
intangible assets was $111 million and $114 million,
respectively. Amortization of other intangible assets is
included in Operating expenses in the Condensed Consolidated
Statements of Income.
14
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amortization expense for other intangible assets, based upon our
existing other intangible assets and their current useful lives
as of October 3, 2008, is estimated to be as follows (in
thousands):
|
|
|
|
|
Remainder of fiscal 2009
|
|
$
|
110,984
|
|
2010
|
|
|
220,254
|
|
2011
|
|
|
219,492
|
|
2012
|
|
|
217,413
|
|
2013
|
|
|
215,446
|
|
Thereafter
|
|
|
135,771
|
|
|
|
|
|
|
Total(1)
|
|
$
|
1,119,360
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Norton tradename has an indefinite life and is not subject
to amortization. |
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 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 with an interest rate of 4.7075% per annum due and payable
quarterly. During the first quarter of fiscal 2009, we repaid
the entire Line of Credit principal amount of $200 million
plus accrued interest of $3 million. Total interest expense
associated with this borrowing was approximately
$6 million. As of October 3, 2008, we were in
compliance with all required covenants, and there was no
outstanding balance on the credit facility.
|
|
Note 9.
|
Assets
Held for Sale
|
In accordance with the provisions of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, (SFAS No. 144) land and
buildings held for sale are classified on our Condensed
Consolidated Balance Sheets as Other current assets. The
following table summarizes the changes in assets held for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 28,
|
|
|
Added
|
|
|
Sold
|
|
|
|
|
|
As of October 3,
|
|
|
|
2008
|
|
|
Properties
|
|
|
Properties
|
|
|
Adjustments
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Assets held for sale
|
|
$
|
39,568
|
|
|
$
|
53,346
|
|
|
$
|
(38,203
|
)
|
|
$
|
335
|
|
|
$
|
55,046
|
|
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 and thus we
have recorded an impairment loss of $26 million during the
second quarter of fiscal 2009. We believe that these sales will
be completed no later than the second quarter of fiscal 2010.
During the three months ended October 3, 2008, we sold two
of our properties previously classified as assets held for sale
for cash proceeds of $40 million. The gain and loss on the
sales were not significant.
|
|
Note 10.
|
Stock
repurchases
|
For the three months ended October 3, 2008, we repurchased
9.3 million shares of our common stock at prices ranging
from $19.92 to $22.64 per share for an aggregate amount of
$200 million. For the six months ended October 3,
2008, we repurchased 19.0 million shares of our common
stock at prices ranging from $19.35 to $22.64
15
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
per share for an aggregate amount of $400 million. As of
October 3, 2008, an aggregate of $600 million remained
authorized for future repurchases from the June 14, 2007
stock repurchase plan.
|
|
Note 11.
|
Earnings
Per Share
|
The components of earnings per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
October 3,
|
|
|
September 28,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
Earnings per share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
140,073
|
|
|
$
|
50,368
|
|
|
$
|
326,765
|
|
|
$
|
145,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$
|
0.17
|
|
|
$
|
0.06
|
|
|
$
|
0.39
|
|
|
$
|
0.16
|
|
Weighted average outstanding common shares
|
|
|
838,489
|
|
|
|
875,662
|
|
|
|
838,537
|
|
|
|
883,652
|
|
Earnings per share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
140,073
|
|
|
$
|
50,368
|
|
|
$
|
326,765
|
|
|
$
|
145,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted
|
|
$
|
0.16
|
|
|
$
|
0.06
|
|
|
$
|
0.38
|
|
|
$
|
0.16
|
|
Weighted average outstanding common shares
|
|
|
838,489
|
|
|
|
875,662
|
|
|
|
838,537
|
|
|
|
883,652
|
|
Shares issuable from assumed exercise of options
|
|
|
12,313
|
|
|
|
15,952
|
|
|
|
12,715
|
|
|
|
16,799
|
|
Dilutive impact of restricted stock and restricted stock units
|
|
|
1,532
|
|
|
|
1,145
|
|
|
|
1,621
|
|
|
|
1,232
|
|
Dilutive impact of assumed conversion of Senior Notes using the
treasury stock method(1)
|
|
|
|
|
|
|
|
|
|
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares for purposes of calculating diluted earnings per
share
|
|
|
852,334
|
|
|
|
892,759
|
|
|
|
853,174
|
|
|
|
901,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 9 of Notes to Consolidated Financial Statements in
our Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008 for an explanation
of the impact of the Senior Notes on Earnings per share -
diluted. |
The following potential common shares were excluded from the
computation of diluted earnings per share, as their effect would
have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
October 3,
|
|
|
September 28,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Stock options
|
|
|
47,158
|
|
|
|
64,828
|
|
|
|
49,409
|
|
|
|
64,972
|
|
Restricted stock units
|
|
|
96
|
|
|
|
10
|
|
|
|
60
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,254
|
|
|
|
64,838
|
|
|
|
49,469
|
|
|
|
64,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three and six months ended October 3, 2008 and
September 28, 2007, the effect of the convertible senior
notes, warrants issued and options purchased in connection with
the convertible senior notes were excluded for the reasons
discussed in Note 9 of Notes to Consolidated Financial
Statements in our Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008.
16
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 12.
|
Stock-based
Compensation
|
We currently have in effect certain stock purchase plans, stock
award plans, and equity incentive plans, as described in detail
in Note 15 of Notes to Consolidated Financial Statements in
our Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008. These plans were
amended in several respects during the second quarter of fiscal
2009. At our 2008 Annual Meeting held in September 2008, our
stockholders approved (a) the amendment of our 2004 Equity
Incentive Plan to reserve an additional 50,000,000 shares
of the Companys common stock for issuance thereunder, and
(b) the adoption of our 2008 Employee Stock Purchase Plan
including the reservation of 20,000,000 shares of common
stock became reserved for issuance thereunder, with the first
purchase period thereunder to commence on February 16,
2009. The 2008 Employee Stock Purchase Plan replaces the 1998
Employee Stock Purchase Plan, as amended, which terminates
pursuant to its terms on January 1, 2009 subject to
completion of the final purchase period under the 1998 Employee
Stock Purchase Plan on February 15, 2009.
The following table sets forth the total stock-based
compensation expense recognized in our Condensed Consolidated
Statements of Income for the three and six months ended
October 3, 2008 and September 28, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
October 3,
|
|
|
September 28,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except earnings per share data)
|
|
|
Cost of revenues Content, subscriptions, and
maintenance
|
|
$
|
3,298
|
|
|
$
|
3,542
|
|
|
$
|
6,142
|
|
|
$
|
6,953
|
|
Cost of revenues Licenses
|
|
|
942
|
|
|
|
957
|
|
|
|
1,734
|
|
|
|
1,942
|
|
Sales and marketing
|
|
|
18,172
|
|
|
|
13,957
|
|
|
|
37,532
|
|
|
|
28,421
|
|
Research and development
|
|
|
14,026
|
|
|
|
14,842
|
|
|
|
27,153
|
|
|
|
29,008
|
|
General and administrative
|
|
|
8,210
|
|
|
|
7,692
|
|
|
|
16,934
|
|
|
|
15,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
|
44,648
|
|
|
|
40,990
|
|
|
|
89,495
|
|
|
|
81,734
|
|
Tax benefit associated with stock-based compensation expense
|
|
|
13,310
|
|
|
|
10,484
|
|
|
|
25,385
|
|
|
|
19,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on net income
|
|
$
|
31,338
|
|
|
$
|
30,506
|
|
|
$
|
64,110
|
|
|
$
|
62,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on earnings per
share basic
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
0.08
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on earnings per
share diluted
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
0.08
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 3, 2008, total unrecognized compensation cost
adjusted for estimated forfeitures, related to unvested stock
options, Restricted Stock Units (RSUs), and
Restricted Stock Agreements (RSAs), was
$112 million, $141 million, and $0.4 million,
respectively, which is expected to be recognized over the
remaining weighted-average vesting periods of 2.4 years for
stock options, 2.4 years for RSUs, and 0.3 years for
RSAs.
The weighted-average fair value per option granted during the
six months ended October 3, 2008 and September 28,
2007, including assumed options, was $5.30 and $6.20,
respectively. The total intrinsic value of options exercised
during the six months ended October 3, 2008 and
September 28, 2007, including assumed options, was
$97 million and $89 million, respectively.
The weighted-average fair value per RSU granted during the six
months ended October 3, 2008 and September 28, 2007,
including assumed RSUs, was $19.96 and $19.44, respectively. The
fair value of RSUs granted for the six months ended
October 3, 2008 and September 28, 2007 was
$181 million and $68 million,
17
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
respectively. The total fair value of RSUs that vested during
the six months ended October 3, 2008 and September 28,
2007, including assumed RSUs, was $49 million and
$12 million, respectively.
Our restructuring costs consist of severance, benefits,
facilities and other costs. 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 costs generally include
rent expense less expected sublease income, lease termination
costs, asset abandonment costs and the effects of foreign
currency exchange. Other costs include relocation and transition
costs and consulting services. Restructuring expenses generally
do not impact a particular reporting segment and are included in
the Other reporting segment.
2008
Restructuring Plan
In fiscal 2008, management approved and initiated a
restructuring plan (the 2008 Plan) to reduce
costs, outsource certain back office functions, implement
management structure changes, optimize the business structure
and discontinue certain products. Projects within the
2008 Plan began in the third quarter of fiscal 2008.
Severance payments related to the 2008 Plan are expected to
be completed in fiscal 2010 and excess facility obligations are
to be paid through the first quarter of fiscal 2012. Costs
during the six months ended October 3, 2008 were
$15 million related to severance and benefit costs,
$2 million related to facilities costs and $6 million
related to other associated costs. Total remaining costs of the
2008 Plan, consisting of severance, benefits, excess
facilities and other costs, are estimated to range between
approximately $55 million and $85 million.
2007
Restructuring Plans
In fiscal 2007, management entered into restructuring plans to
consolidate facilities and reduce operating costs. As part of
the plan, we consolidated certain facilities and exited
facilities related to earlier acquisitions. 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
2006
Restructuring Plans
In fiscal 2006, management entered into restructuring plans to
reduce operating costs and consolidate facilities. Restructuring
liabilities related to these events as of October 3, 2008
are $3 million primarily related to excess facilities and
are expected to be paid through the fourth quarter of fiscal
2018.
18
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Acquisition-Related
Restructuring Plans
Restructuring liabilities related to acquisitions as of
October 3, 2008 were $6 million, consisting primarily
of excess facilities obligations. Of the $6 million
restructuring liability, $3 million relates to the Vontu
acquisition and $3 million relates to the Veritas
acquisition. These amounts are expected to be paid through the
first quarter of fiscal 2013 and 2014, respectively. Costs
during the six months ended October 3, 2008 were not
significant and primarily represent adjustments to previously
recorded costs. Further severance and benefit costs are not
expected to be recognized in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Liability
|
|
|
|
|
|
|
Costs,
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
March 28,
|
|
|
Net of
|
|
|
Cash
|
|
|
Non-Cash
|
|
|
October 3,
|
|
|
Incurred
|
|
|
|
2008
|
|
|
Adjustments(1)
|
|
|
Payments
|
|
|
Settlements
|
|
|
2008
|
|
|
to Date
|
|
|
|
(In thousands)
|
|
|
2008 Restructuring Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
$
|
16,337
|
|
|
$
|
15,439
|
|
|
$
|
(23,052
|
)
|
|
$
|
|
|
|
$
|
8,724
|
|
|
$
|
57,064
|
|
Facilities
|
|
|
1,031
|
|
|
|
2,337
|
|
|
|
(1,254
|
)
|
|
|
|
|
|
|
2,114
|
|
|
|
3,620
|
|
Asset impairments
|
|
|
|
|
|
|
1,769
|
|
|
|
|
|
|
|
(1,769
|
)
|
|
|
|
|
|
|
1,769
|
|
Other(2)
|
|
|
|
|
|
|
5,509
|
|
|
|
(5,509
|
)
|
|
|
|
|
|
|
|
|
|
|
5,509
|
|
2007 Restructuring Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
20
|
|
|
|
1,189
|
|
|
|
(946
|
)
|
|
|
|
|
|
|
263
|
|
|
|
86,361
|
|
Facilities
|
|
|
2,585
|
|
|
|
(379
|
)
|
|
|
(2,137
|
)
|
|
|
|
|
|
|
69
|
|
|
|
9,594
|
|
Prior & Acquisition Restructuring Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,536
|
|
Facilities
|
|
|
10,647
|
|
|
|
931
|
|
|
|
(2,906
|
)
|
|
|
|
|
|
|
8,672
|
|
|
|
22,042
|
|
Purchase price adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30,620
|
|
|
$
|
26,795
|
|
|
$
|
(35,804
|
)
|
|
$
|
(1,769
|
)
|
|
$
|
19,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
$
|
24,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,557
|
|
|
|
|
|
Other long-term liabilities
|
|
|
6,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Total net adjustments or reversals during the six months ended
October 3, 2008 were not significant. |
|
(2) |
|
Other consists mainly of legal fees which were expensed as
incurred. |
The effective tax rate was approximately 29% and 31% for the
three month periods and 31% and 35% for the six months ended
October 3, 2008 and September 28, 2007, respectively.
The effective tax rates for all periods reflect the benefits of
lower-taxed foreign earnings, domestic manufacturing tax
incentives, and research and development credit, offset by state
income taxes and non-deductible stock-based compensation. We
recognized a $7 million tax benefit in the September 2008
quarter as a result of the IRS agreement on the treatment of the
2005 dividend from a Veritas international subsidiary. That
agreement permitted us to apply $110 million of a
$130 million payment to the outstanding
2000-2001
transfer pricing matter, thereby reducing accumulated interest
accrued for that matter. We recognized an additional
$5 million tax benefit in the September 2008 quarter from
favorable prior year items, including the retroactive
reinstatement of the U.S. federal research and development
credit. Further, the tax expense for the six months ended
October 3, 2008 includes a $5 million tax benefit
related to a favorable Irish settlement that was recorded in the
June 2008 quarter. The September 2007 quarter includes a full
40% tax benefit related to the write-down of intangible and
tangible assets related to the Storage and Server Management
segment (formerly the Data Center Management segment).
19
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 2003 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
October 3, 2008, we are under examination by the IRS, for
the Veritas U.S. federal income taxes for the 2002 through
2005 tax years.
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. The
IRS answered our petition on August 30, 2006, at which
point the dispute was docketed for trial. 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 also agreed to waive the assessment of penalties. During
July 2008, we completed the trial phase of the Tax Court case,
which dealt with the remaining issue covered in the assessment.
At trial, the IRS changed its position with respect to this
remaining issue, which decreased the remaining amount at issue
from $832 million to $545 million, excluding interest.
In October 2008, we filed our post-trial brief with the
U.S. Tax Court.
We strongly believe the IRS position with regard to this
matter is inconsistent with applicable tax laws and existing
Treasury regulations, and that our previously reported income
tax provision for the years in question is appropriate. If, upon
resolution, we are required to pay an amount in excess of our
provision for this matter, based upon current accounting
authority, 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.
The accounting treatment related to pre-acquisition unrecognized
tax benefits will change when SFAS No. 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.
In July 2008, we reached an agreement with the IRS concerning
our eligibility to claim a lower tax rate on a distribution made
from a Veritas foreign subsidiary prior to the July 2005
acquisition. The distribution was intended to be made pursuant
to the American Jobs Creation Act of 2004, and therefore
eligible for a 5.25% effective U.S. federal rate of tax, in
lieu of the 35% statutory rate. The final impact of this
agreement is not yet known since this relates to the taxability
of earnings that are otherwise the subject of the tax years
2000-2001
transfer pricing dispute which in turn is being addressed in the
U.S. Tax Court. To the extent that we owe taxes as a result
of the transfer pricing dispute, we anticipate that the
incremental tax due from this negotiated agreement will
decrease. We currently estimate that the most probable outcome
from this negotiated agreement will be $13 million or less,
for which an accrual has already been made. As previously
disclosed in
Form 10-K
for the fiscal year ended March 28, 2008, we made a payment
of $130 million to the IRS for this matter in May 2006. We
have applied $110 million of this payment as a deposit on
the outstanding transfer pricing matter for the tax years
2000-2001.
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.
20
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
See Note 14 for a discussion of our tax litigation with the
IRS relating to the 2000 and 2001 tax year of Veritas.
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 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. On
July 31, 2008, the Court held a final approval hearing and,
on August 5, 2008, the Court entered an order approving the
settlement. An objector to the fees portion of the settlement
has lodged an appeal. 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.
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
was returned to the District Court for further proceedings,
including reissuance of the notice, and the District Court again
approved the settlement and dismissed the matter.
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. 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 16.
|
Segment
Information
|
During the first quarter of fiscal 2009, we changed our
reporting segments to better align our operating structure.
Altiris services that were formerly included in the Security and
Compliance segment were moved to the Services segment. This move
is a result of operational changes in our Services segment and
the continued integration of our Altiris business. We revised
the segment information for the prior year to conform to the new
presentation. As of October 3, 2008, our five operating
segments are:
|
|
|
|
|
Consumer Products. Our Consumer Products
segment focuses on delivering our Internet security, PC tuneup,
and backup products to individual users and home offices.
|
21
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Security and Compliance. Our Security and
Compliance segment focuses on providing large, medium, and
small-sized businesses with solutions for compliance and
security management, endpoint security, messaging management,
and data protection management software solutions that allow our
customers to secure, provision, and remotely access their
laptops, PCs, mobile devices, and servers.
|
|
|
|
Storage and Server Management. Our Storage and
Server Management segment focuses on providing enterprise and
large enterprise customers with storage and server management,
backup, and data protection 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 the value of 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 and 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 described in our
Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008. 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.
22
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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)
|
|
|
Three months ended October 3, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
437,654
|
|
|
$
|
400,992
|
|
|
$
|
572,309
|
|
|
$
|
106,624
|
|
|
$
|
431
|
|
|
$
|
1,518,010
|
|
Percentage of total net revenues
|
|
|
29
|
%
|
|
|
26
|
%
|
|
|
38
|
%
|
|
|
7
|
%
|
|
|
0
|
%
|
|
|
100
|
%
|
Operating income (loss)
|
|
|
235,303
|
|
|
|
62,427
|
|
|
|
307,716
|
|
|
|
680
|
|
|
|
(389,701
|
)
|
|
|
216,425
|
|
Operating margin of segment
|
|
|
54
|
%
|
|
|
16
|
%
|
|
|
54
|
%
|
|
|
1
|
%
|
|
|
*
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
4,401
|
|
|
|
6,367
|
|
|
|
12,630
|
|
|
|
2,830
|
|
|
|
185,283
|
|
|
|
211,511
|
|
Three months ended September 28, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
433,508
|
|
|
$
|
388,522
|
|
|
$
|
507,957
|
|
|
$
|
88,774
|
|
|
$
|
328
|
|
|
$
|
1,419,089
|
|
Percentage of total net revenues
|
|
|
31
|
%
|
|
|
27
|
%
|
|
|
36
|
%
|
|
|
6
|
%
|
|
|
0
|
%
|
|
|
100
|
%
|
Operating income (loss)
|
|
|
226,372
|
|
|
|
49,148
|
|
|
|
151,375
|
|
|
|
(14,126
|
)
|
|
|
(353,880
|
)
|
|
|
58,889
|
|
Operating margin of segment
|
|
|
52
|
%
|
|
|
13
|
%
|
|
|
30
|
%
|
|
|
(16
|
)%
|
|
|
*
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
1,783
|
|
|
|
6,332
|
|
|
|
14,989
|
|
|
|
2,778
|
|
|
|
178,166
|
|
|
|
204,048
|
|
Three months ended period over period comparison:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
8,931
|
|
|
$
|
13,279
|
|
|
$
|
156,341
|
|
|
$
|
14,806
|
|
|
$
|
(35,821
|
)
|
|
$
|
157,536
|
|
Operating income percentage year over year change
|
|
|
4
|
%
|
|
|
27
|
%
|
|
|
103
|
%
|
|
|
*
|
|
|
|
10
|
%
|
|
|
|
|
Six months ended October 3, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
909,985
|
|
|
$
|
846,639
|
|
|
$
|
1,187,465
|
|
|
$
|
223,337
|
|
|
$
|
906
|
|
|
$
|
3,168,332
|
|
Percentage of total net revenues
|
|
|
29
|
%
|
|
|
27
|
%
|
|
|
37
|
%
|
|
|
7
|
%
|
|
|
0
|
%
|
|
|
100
|
%
|
Operating income (loss)
|
|
|
510,808
|
|
|
|
143,587
|
|
|
|
614,056
|
|
|
|
(2,779
|
)
|
|
|
(770,311
|
)
|
|
|
495,361
|
|
Operating margin of segment
|
|
|
56
|
%
|
|
|
17
|
%
|
|
|
52
|
%
|
|
|
(1
|
)%
|
|
|
*
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
6,008
|
|
|
|
13,002
|
|
|
|
26,208
|
|
|
|
5,734
|
|
|
|
360,615
|
|
|
|
411,567
|
|
Six months ended September 28, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
857,258
|
|
|
$
|
776,191
|
|
|
$
|
1,013,537
|
|
|
$
|
171,872
|
|
|
$
|
569
|
|
|
$
|
2,819,427
|
|
Percentage of total net revenues
|
|
|
30
|
%
|
|
|
28
|
%
|
|
|
36
|
%
|
|
|
6
|
%
|
|
|
0
|
%
|
|
|
100
|
%
|
Operating income (loss)
|
|
|
460,159
|
|
|
|
109,250
|
|
|
|
373,991
|
|
|
|
(32,742
|
)
|
|
|
(717,573
|
)
|
|
|
193,085
|
|
Operating margin of segment
|
|
|
54
|
%
|
|
|
14
|
%
|
|
|
37
|
%
|
|
|
(19
|
)%
|
|
|
*
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
3,391
|
|
|
|
13,180
|
|
|
|
30,357
|
|
|
|
5,424
|
|
|
|
365,141
|
|
|
|
417,493
|
|
Six months ended period over period comparison:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
50,649
|
|
|
$
|
34,337
|
|
|
$
|
240,065
|
|
|
$
|
29,963
|
|
|
$
|
(52,738
|
)
|
|
$
|
302,276
|
|
Operating income percentage year over year change
|
|
|
11
|
%
|
|
|
31
|
%
|
|
|
64
|
%
|
|
|
92
|
%
|
|
|
7
|
%
|
|
|
|
|
|
|
|
* |
|
Percentage not meaningful |
23
SYMANTEC
CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 17.
|
Subsequent
Events
|
On October 6, 2008, we completed the acquisition of PC
Tools, an Australia-based provider of innovative software
products designed to protect the privacy and security of
computer users. The aggregate purchase price was approximately
$250 million in cash. Should PC Tools meet certain bookings
and expense targets within six months of the acquisition date,
we would increase the purchase price by up to $30 million.
On October 8, 2008, we announced the signing of a
definitive agreement to acquire MessageLabs, a
United Kingdom-based provider of online messaging and Web
security services. We expect to acquire MessageLabs for a
purchase price of approximately $695 million in cash based
on exchange rates as of October 8, 2008, subject to foreign
currency adjustments, payable in approximately
£310 million and $154 million. The acquisition is
expected to close by the end of the third quarter of fiscal 2009.
24
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
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 in Risk
Factors, set forth in Part I, Item 1A, of our annual
report on
Form 10-K
for the fiscal year ended March 28, 2008. We encourage you
to read that section carefully.
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 accounting year. Unless otherwise
stated, references to three and six month ended periods in this
report relate to fiscal periods ended October 3, 2008 and
September 28, 2007. The October 3, 2008 and
September 28, 2007 quarters both consisted of
13 weeks. The six months ended October 3, 2008
consisted of 27 weeks while the six months ended
September 28, 2007 consisted of 26 weeks.
Our
Operating Segments
Our operating segments are significant strategic business units
that offer different products and services, distinguished by
customer needs. Since the March 2008 quarter, we have operated
in five operating segments: Consumer Products, Security and
Compliance, Storage and Server Management, Services, and Other.
During the first quarter of fiscal 2009, we changed our
reporting segments to better align our operating structure.
Altiris services that were formerly included in the Security and
Compliance segment were moved to the Services segment. This move
is a result of operational changes in our Services segment and
the continued integration of our Altiris business. We revised
the segment information for the prior year to conform to the new
presentation. For further descriptions of our operating
segments, see Note 16 of the Notes to Condensed
Consolidated Financial Statements in this quarterly report. Our
reportable segments are the same as our operating segments.
Financial
Results and Trends
Our net income was $140 million and $327 million, for
the three and six months ended October 3, 2008,
respectively, as compared to our net income of $50 million
and $146 million for the three and six months ended
September 28, 2007, respectively. The higher net income for
the fiscal 2009 periods as compared to the same period last year
was primarily due to higher revenues in each fiscal 2009 period.
Revenue for the three and six months ended October 3, 2008
was 7% and 12% higher than revenue for the three and six months
ended September 28, 2007, respectively. During the three
and six months ended October 3, 2008, we delivered revenue
growth across all of our geographic regions as compared to the
same periods last year and
25
experienced revenue growth in all of our segments. In addition
to the foreign currency effects described below, we believe our
increased revenue was largely driven by continued demand for our
products as a result of the proliferation of structured and
unstructured data, the need to simplify and standardize data
center infrastructures, the convergence of endpoint security and
management, and increased adoption of our Consumer Products
suites. Our revenue growth is also attributable to increased
awareness of Internet-related security threats around the world
and demand for storage solutions. While we reported increased
revenue year over year, we are not immune to macroeconomic
conditions. For example, if the challenging economic conditions
affecting global markets continue or deteriorate further, we may
experience slower or negative revenue growth and our business
and operating results might suffer. Our expectation is that
currency changes may have a negative impact on year-to-year
revenue and deferred revenue in the coming quarter. In light of
these economic conditions, we will continue to align our cost
structure with our revenue expectations.
Weakness in the U.S. dollar compared to foreign currencies
positively impacted our international revenue growth by
approximately $51 million and $153 million,
respectively, during the three and six month periods ended
October 3, 2008 as compared to the same periods last year,
although this impact has been less than we experienced in recent
quarters due to a relative strengthening of the U.S. dollar
compared to foreign currencies during the September 2008
quarter. 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.
Critical
Accounting Estimates
Income
Taxes
The section entitled Income Taxes in our Critical
Accounting Estimates section of our
Form 10-K
for fiscal year 2008 is hereby updated as follows:
In July 2008, we reached an agreement with the Internal Revenue
Service (IRS) concerning our eligibility to claim a
lower tax rate on a distribution made from a Veritas foreign
subsidiary prior to the July 2005 acquisition. The distribution
was intended to be made pursuant to the American Jobs Creation
Act of 2004, and therefore eligible for a 5.25% effective
U.S. federal rate of tax, in lieu of the 35% statutory
rate. The final impact of this agreement is not yet known since
this relates to the taxability of earnings that are otherwise
the subject of the tax years
2000-2001
transfer pricing dispute which in turn is being addressed in the
U.S. Tax Court. To the extent that we owe taxes as a result
of the transfer pricing dispute, we anticipate that the
incremental tax due from this negotiated agreement will
decrease. We currently estimate that the most probable outcome
from this negotiated agreement will be $13 million or less,
for which an accrual has already been made. As previously
disclosed in
Form 10-K
for the fiscal year ended March 28, 2008, we made a payment
of $130 million to the IRS for this matter in May 2006. We
applied $110 million of this payment as a deposit on the
outstanding transfer pricing matter for the tax years
2000-2001.
Fair
Value of Financial Instruments
Beginning in the first fiscal quarter of 2009, the assessment of
fair value for our financial instruments is based on the
provisions of SFAS No. 157. SFAS No. 157
establishes a fair value hierarchy that is based on three levels
of inputs and requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs
when measuring fair value.
As of October 3, 2008, our financial instruments measured
at fair value on a recurring basis included $1.2 billion of
assets. Our cash equivalents, which primarily consist of
commercial paper, money market funds and government notes, total
$1.1 billion which is 93% of our total financial
instruments measured at fair value on a recurring basis.
As of October 3, 2008, $406 million were classified as
Level 1, $403 million (33% of total financial
instruments fair valued on a recurring basis) of which represent
investments in money market funds. These were classified as
Level 1 because their valuations were based on quoted
prices for identical securities in active markets. Determining
fair value for Level 1 instruments generally does not
require significant management judgment.
26
As of October 3, 2008, $825 million were classified as
Level 2, $483 million and $249 million (60%
together of total financial instruments fair valued on a
recurring basis) of which represent investments in commercial
paper and government notes, respectively. These were classified
as Level 2 because their valuations were based on pricing
models with all significant inputs derived from or corroborated
by observable market prices for identical securities in markets
with insufficient volume or infrequent transactions (less active
markets). Level 2 inputs also generally include non-binding
market consensus prices that are corroborated by observable
market data; quoted prices for similar instruments;
model-derived valuations in which all significant inputs are
observable or can be derived principally from or corroborated
with observable market data for substantially the full term of
the assets or liabilities or quoted prices for similar assets or
liabilities. The level of judgment and subjectivity involved
with Level 2 instruments generally includes:
|
|
|
|
|
Determining which instruments are most similar to the instrument
being priced and identifying a sample of similar securities
based on the coupon rates, maturity, issuer, credit rating, and
instrument type, and subjectively selecting an individual
security or multiple securities that are deemed most similar to
the security being priced. For most of our financial instruments
classified as Level 2 at October 3, 2008, identical
securities were used for determining fair value.
|
|
|
|
Determining whether a market is considered active. An assessment
of an active market for marketable securities generally takes
into consideration trading volume for each instrument type or
whether a trading market exists for a given instrument. Our
Level 2 financial instruments were so classified due to
either low trading activity in active markets or no active
market existed. Where no active market existed, amortized cost
was used and was assumed to equate to fair value because of the
short maturities.
|
|
|
|
Determining which model-derived valuations to use in determining
fair value. When observable market prices for identical
securities or similar securities are not available, we may price
marketable securities using: non-binding market consensus prices
that are corroborated with observable market data; or pricing
models, such as discounted cash flow approaches, with all
significant inputs derived from or corroborated with observable
market data. In addition, the credit ratings for issuers of debt
instruments in which we are invested could change, which could
lead to lower fair values. During the second quarter of 2009,
the fair value of $22 million of fixed-income securities
was determined using benchmark pricing models for identical or
similar securities.
|
As of October 3, 2008, we have no financial instruments
with unobservable inputs as classified in Level 3 under the
SFAS No. 157 hierarchy. Level 3 instruments
generally would include unobservable inputs to the valuation
methodology that are significant to the measurement of fair
value of assets or liabilities. The determination of fair value
for Level 3 instruments requires the most management
judgment and subjectivity.
Other than these changes, there have been no changes in our
critical accounting estimates during the six months ended
October 3, 2008 as compared to the critical accounting
estimates disclosed in Managements Discussion and Analysis
of Financial Condition and Results of Operations included in our
Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008.
RESULTS
OF OPERATIONS
Total Net
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Net revenues
|
|
$
|
1,518,010
|
|
|
$
|
1,419,089
|
|
|
$
|
98,921
|
|
|
|
7
|
%
|
|
$
|
3,168,332
|
|
|
$
|
2,819,427
|
|
|
$
|
348,905
|
|
|
|
12
|
%
|
Net revenues increased for the three months ended
October 3, 2008 as compared to the same period last year
primarily due to $73 million in increased sales related to
our Storage Foundation, Net Backup, Cluster Server and
Information Risk Management products. The increase in demand for
these product lines is driven by continued demand for products
related to the standardization and simplification of data center
infrastructures, demand for
27
products related to archiving solutions and the proliferation of
structured and unstructured data. In addition, we realized
revenues of approximately $20 million for the three months
ended October 3, 2008 from sales of products gained from
our fiscal 2008 acquisitions for which there is no comparable
revenue in the same period last year.
The increase in revenues for the six months ended
October 3, 2008 as compared to the same period last year is
primarily due to $171 million in increased sales related to
our Storage Foundation, Net Backup, and core Consumer products.
The increase in demand for these product lines is driven by
continued demand for products related to the standardization and
simplification of data center infrastructures, the proliferation
of structured and unstructured data, and increased adoption of
our Consumer Products suites. We realized net revenues of
approximately $35 million for the six months ended
October 3, 2008 from the contribution of sales of products
acquired from our fiscal 2008 acquisitions for which there is no
comparable revenue in the same period last year. In addition,
revenues for the six months ended October 3, 2008 benefited
from additional amortization of deferred revenue of
approximately $75 million as a result of the July 4,
2008 quarter being comprised of 14 weeks as compared to
13 weeks for the same period last year.
The revenue increases for the three and six months ended
October 3, 2008 discussed above are further described in
the segment discussions that follow.
Content,
subscriptions, and maintenance revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Content, subscriptions, and maintenance revenues
|
|
$
|
1,180,715
|
|
|
$
|
1,117,165
|
|
|
$
|
63,550
|
|
|
|
6
|
%
|
|
$
|
2,471,707
|
|
|
$
|
2,203,683
|
|
|
$
|
268,024
|
|
|
|
12
|
%
|
Percentage of total net revenues
|
|
|
78
|
%
|
|
|
79
|
%
|
|
|
|
|
|
|
|
|
|
|
78
|
%
|
|
|
78
|
%
|
|
|
|
|
|
|
|
|
Content, subscriptions, and maintenance revenues increased for
the three and six months ended October 3, 2008 as compared
to the same periods last year primarily due to an increase of
$61 million and $223 million, respectively, in revenue
related to enterprise products and services. This increase in
enterprise product and services revenue is largely attributable
to demand for our Storage Foundation, Net Backup, Backup Exec,
Cluster Server and Information Risk Management products, and
consulting services as a result of increased demand for security
and storage solutions. This increased demand was driven by the
proliferation of structured and unstructured data, and
increasing sales of services in conjunction with our license
sales as a result of our focus on offering our customers a more
comprehensive IT solution. To a lesser extent, content,
subscriptions, and maintenance revenues for the six months ended
October 3, 2008 benefited from an additional week of
deferred revenue amortization as a result of the July 4,
2008 quarter being comprised of 14 weeks compared to
13 weeks for the same period last year.
Licenses
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Licenses revenues
|
|
$
|
337,295
|
|
|
$
|
301,924
|
|
|
$
|
35,371
|
|
|
|
12
|
%
|
|
$
|
696,625
|
|
|
$
|
615,744
|
|
|
$
|
80,881
|
|
|
|
13
|
%
|
Percentage of total net revenues
|
|
|
22
|
%
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
22
|
%
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
Licenses revenues increased for the three and six months ended
October 3, 2008 as compared to the same periods last year
primarily due to an increase of $39 million and
$63 million, respectively, in revenue related to our
Storage Foundation and Net Backup products. These increases are
a result of increased demand for storage solutions driven by the
proliferation of structured and unstructured data.
28
Net
revenue and operating income by segment
Consumer
Products segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Consumer Products revenues
|
|
$
|
437,654
|
|
|
$
|
433,508
|
|
|
$
|
4,146
|
|
|
|
1
|
%
|
|
$
|
909,985
|
|
|
$
|
857,258
|
|
|
$
|
52,727
|
|
|
|
6
|
%
|
Percentage of total net revenues
|
|
|
29
|
%
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
29
|
%
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
Consumer Products operating income
|
|
$
|
235,303
|
|
|
$
|
226,372
|
|
|
$
|
8,931
|
|
|
|
4
|
%
|
|
$
|
510,808
|
|
|
$
|
460,159
|
|
|
$
|
50,649
|
|
|
|
11
|
%
|
Percentage of Consumer Products revenues
|
|
|
54
|
%
|
|
|
52
|
%
|
|
|
|
|
|
|
|
|
|
|
56
|
%
|
|
|
54
|
%
|
|
|
|
|
|
|
|
|
Consumer Products revenues increased for the three and six
months ended October 3, 2008 as compared to the same period
last year primarily due to an increase of $82 million and
$180 million, respectively, in revenue from our new
Consumer Products suite and to a lesser extent by a favorable
impact of foreign currencies in relation to the
U.S. dollar. This revenue increase is due to the increased
electronic order demand for Norton 360 offset by declining
retail sales during fiscal 2008. The revenue from our consumer
products is generally recognized ratably over the 12 months
after the product is sold. This increase is partially offset by
aggregate decreases for the three and six months ended
October 3, 2008 as compared to the same period last year of
$76 million and $127 million, respectively, in revenue
from our Norton Internet Security and Norton AntiVirus products.
This decrease results from our customers continued
migration to our Norton 360 product, which offers 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) grew by $32 million and
$95 million, respectively, for the three and six months
ended October 3, 2008 as compared to the same period last
year. Electronic orders constituted 79% and 78% of Consumer
Products revenues for the three and six months ended
October 3, 2008 as compared to 72% and 72%, respectively,
for the same periods last year.
Operating income for this segment increased for the three and
six months ended October 3, 2008 as compared to the same
periods last year as revenue growth exceeded the growth in total
expenses. Total expenses in our Consumer Products segment
decreased for the three month ended October 3, 2008 by
$5 million and increased for the six months ended
October 3, 2008 by $2 million as compared to the same
periods last year. Our operating expenses for the three and six
months ended October 3, 2008 benefited from our continued
cost containment measures.
Security
and Compliance segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Security and Compliance revenues
|
|
$
|
400,992
|
|
|
$
|
388,522
|
|
|
$
|
12,470
|
|
|
|
3
|
%
|
|
$
|
846,639
|
|
|
$
|
776,191
|
|
|
$
|
70,448
|
|
|
|
9
|
%
|
Percentage of total net revenues
|
|
|
26
|
%
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
27
|
%
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
Security and Compliance operating income
|
|
$
|
62,427
|
|
|
$
|
49,148
|
|
|
$
|
13,279
|
|
|
|
27
|
%
|
|
$
|
143,587
|
|
|
$
|
109,250
|
|
|
$
|
34,337
|
|
|
|
31
|
%
|
Percentage of Security and Compliance revenues
|
|
|
16
|
%
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
17
|
%
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
29
Security and Compliance revenues increased for the three and six
months ended October 3, 2008 as compared to the same
periods last year by $12 million and $70 million,
respectively, in revenue as a result of increased demand for
endpoint management, increased demand for archiving solutions,
and the successful integration of acquired products into our
product portfolio.
Operating income for the Security and Compliance segment
increased, as revenue growth exceeded the growth in total
expenses for the segment. Total expenses from our Security and
Compliance segment decreased for the three months ended
October 3, 2008 as compared to the same period last year by
$1 million. This was primarily as a result of continued
cost containment measures. Total expenses increased for the six
months ended October 3, 2008 as compared to the same period
last year by $36 million. This was primarily due to higher
overall sales and R&D expenses in addition to the inclusion
of the Vontu acquisition in this segment.
Storage
and Server Management segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Storage and Server Management revenues
|
|
$
|
572,309
|
|
|
$
|
507,957
|
|
|
$
|
64,352
|
|
|
|
13
|
%
|
|
$
|
1,187,465
|
|
|
$
|
1,013,537
|
|
|
$
|
173,928
|
|
|
|
17
|
%
|
Percentage of total net revenues
|
|
|
38
|
%
|
|
|
36
|
%
|
|
|
|
|
|
|
|
|
|
|
37
|
%
|
|
|
36
|
%
|
|
|
|
|
|
|
|
|
Storage and Server Management operating income
|
|
$
|
307,716
|
|
|
$
|
151,375
|
|
|
$
|
156,341
|
|
|
|
103
|
%
|
|
$
|
614,056
|
|
|
$
|
373,991
|
|
|
$
|
240,065
|
|
|
|
64
|
%
|
Percentage of Storage and Server Management revenues
|
|
|
54
|
%
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
|
52
|
%
|
|
|
37
|
%
|
|
|
|
|
|
|
|
|
Storage and Server Management revenues increased for the three
and six months ended October 3, 2008 as compared to the
same period last year by $66 million and $176 million,
respectively, in revenue driven by increased demand for products
related to the standardization and simplification of data center
infrastructures, increased demand for products supporting high
availability and disaster recovery and due to the proliferation
of structured and unstructured data.
Operating income for the Storage and Server Management segment
increased for the three and six months ended October 3,
2008 as compared to the same period last year, as revenue growth
exceeded the growth in total expenses for the segment. Total
expenses in our Storage and Server Management segment decreased
for the three and six months ended October 3, 2008 as
compared to the same periods last year by $92 million and
$66 million, respectively. These decreases primarily
related to the asset impairment on the Application Performance
Management (APM) business divestiture of
$87 million that occurred in the quarter ended
September 28, 2007. Also, our operating expenses for the
three and six months ended October 3, 2008 benefited from
our continued cost containment measures.
30
Services
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Services revenues
|
|
$
|
106,624
|
|
|
$
|
88,774
|
|
|
$
|
17,850
|
|
|
|
20
|
%
|
|
$
|
223,337
|
|
|
$
|
171,872
|
|
|
$
|
51,465
|
|
|
|
30
|
%
|
Percentage of total net revenues
|
|
|
7
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
7
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
Services operating income (loss)
|
|
$
|
680
|
|
|
$
|
(14,126
|
)
|
|
$
|
14,806
|
|
|
|
*
|
|
|
$
|
(2,779
|
)
|
|
$
|
(32,742
|
)
|
|
$
|
29,963
|
|
|
|
92
|
%
|
Percentage of Services revenues
|
|
|
1
|
%
|
|
|
(16
|
)%
|
|
|
|
|
|
|
|
|
|
|
(1
|
)%
|
|
|
(19
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Percentage not meaningful |
Services revenues increased for the three and six months ended
October 3, 2008 as compared to the same period last year
primarily due to an increase in consulting services and Business
Critical Services of $14 million and $42 million,
respectively, as a result of increased demand for more
comprehensive software implementation assistance and increased
demand for our Business Critical Services. Customers are
increasingly purchasing our service offerings in conjunction
with the purchase of our products and augmenting the
capabilities of their own IT staff with our onsite consultants.
Profitability for the Services segment increased, as revenue
growth exceeded the growth in total expenses for the segment.
The Services operating margin improvement was the result of
financial and operational efficiencies aimed at driving
profitability. Total expenses from our Services segment
increased for the three and six months ended October 3,
2008 as compared to the same period last year by $3 million
and $22 million, respectively. This increase for the three
and six months ended October 3, 2008 is primarily due to
higher wages and outside services costs required to support the
segments revenue growth.
Other
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Other revenues
|
|
$
|
431
|
|
|
$
|
328
|
|
|
$
|
103
|
|
|
|
31
|
%
|
|
$
|
906
|
|
|
$
|
569
|
|
|
$
|
337
|
|
|
|
59
|
%
|
Percentage of total net revenues
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Other operating loss
|
|
$
|
(389,701
|
)
|
|
$
|
(353,880
|
)
|
|
$
|
(35,821
|
)
|
|
|
10
|
%
|
|
$
|
(770,311
|
)
|
|
$
|
(717,573
|
)
|
|
$
|
(52,738
|
)
|
|
|
7
|
%
|
|
|
|
* |
|
Percentage not meaningful |
Revenue from our Other segment is comprised primarily of sunset
products and products nearing the end of their life cycle. The
operating loss of our Other segment also includes general and
administrative expenses; amortization of acquired product
rights, other intangible assets, and other assets; charges such
as stock-based compensation and restructuring; and certain
indirect costs that are not charged to the other operating
segments.
31
Net
revenues by geographic region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Americas (U.S., Canada and Latin America)
|
|
$
|
821,823
|
|
|
$
|
764,470
|
|
|
$
|
57,353
|
|
|
|
8
|
%
|
|
$
|
1,683,277
|
|
|
$
|
1,515,919
|
|
|
$
|
167,358
|
|
|
|
11
|
%
|
Percentage of total net revenues
|
|
|
54
|
%
|
|
|
54
|
%
|
|
|
|
|
|
|
|
|
|
|
53
|
%
|
|
|
54
|
%
|
|
|
|
|
|
|
|
|
EMEA (Europe, Middle East, Africa)
|
|
$
|
480,182
|
|
|
$
|
460,485
|
|
|
$
|
19,697
|
|
|
|
4
|
%
|
|
$
|
1,038,021
|
|
|
$
|
918,289
|
|
|
$
|
119,732
|
|
|
|
13
|
%
|
Percentage of total net revenues
|
|
|
32
|
%
|
|
|
32
|
%
|
|
|
|
|
|
|
|
|
|
|
33
|
%
|
|
|
32
|
%
|
|
|
|
|
|
|
|
|
Asia Pacific/Japan
|
|
$
|
216,005
|
|
|
$
|
194,134
|
|
|
$
|
21,871
|
|
|
|
11
|
%
|
|
$
|
447,034
|
|
|
$
|
385,220
|
|
|
$
|
61,814
|
|
|
|
16
|
%
|
Percentage of total net revenues
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
1,518,010
|
|
|
$
|
1,419,089
|
|
|
|
|
|
|
|
|
|
|
$
|
3,168,332
|
|
|
$
|
2,819,427
|
|
|
|
|
|
|
|
|
|
Americas revenues increased in the three and six months ended
October 3, 2008 as compared to the same periods last year
primarily due to increased revenues related to our Storage and
Server Management, Security and Compliance, and Services
segments of $46 million and $128 million,
respectively, as a result of increased demand as discussed above
coupled with the convergence of endpoint security and
management. In addition, for the six months ended
October 3, 2008 as compared to the same period last year,
Americas revenues increased related to our Consumer segment by
$39 million, driven by demand for our Consumer Products
Suites. EMEA and Asia Pacific/Japan revenues increased for the
three and six months ended October 3, 2008 as compared to
the same period last year primarily due to increased revenues
related to our Storage and Server Management and Services
segments of $45 million and $133 million,
respectively, as a result of increased demand for products
related to the standardization and simplification of data center
infrastructures, the proliferation of structured and
unstructured data, and increasing sales of services in
conjunction with our license sales as a result of our focus on
offering our customers a more comprehensive IT solution.
Foreign currencies had a favorable impact on net revenues for
the three and six months ended October 3, 2008 as compared
to the same periods last year although, as noted above, the
recent strengthening of the U.S. dollar compared to foreign
currencies during the September 2008 quarter has dampened this
impact to some extent. 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Cost of revenues
|
|
$
|
309,070
|
|
|
$
|
304,526
|
|
|
$
|
4,544
|
|
|
|
1
|
%
|
|
$
|
621,052
|
|
|
$
|
614,790
|
|
|
$
|
6,262
|
|
|
|
1
|
%
|
Gross margin
|
|
|
80
|
%
|
|
|
79
|
%
|
|
|
|
|
|
|
|
|
|
|
80
|
%
|
|
|
78
|
%
|
|
|
|
|
|
|
|
|
Cost of revenues consists primarily of the amortization of
acquired product rights, fee-based technical support costs, the
costs of billable services, payments to OEMs under
revenue-sharing arrangements, manufacturing and direct material
costs, and royalties paid to third parties under technology
licensing agreements.
Gross margin increased by one percentage point and two
percentage points, respectively, for the three and six months
ended October 3, 2008 as compared to the same periods last
year primarily due to higher revenues and, to a lesser extent,
lower OEM royalty payments, partially offset by a year over year
increase in technical support costs.
32
Cost
of content, subscriptions, and maintenance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Cost of content, subscriptions, and maintenance
|
|
$
|
212,070
|
|
|
$
|
205,572
|
|
|
$
|
6,498
|
|
|
|
3
|
%
|
|
$
|
430,644
|
|
|
$
|
415,238
|
|
|
$
|
15,406
|
|
|
|
4
|
%
|
As a percentage of related revenue
|
|
|
18
|
%
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
17
|
%
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
Cost of content, subscriptions, and maintenance consists
primarily of fee-based technical support costs, costs of
billable services, and payments to OEMs under
revenue-sharing agreements. Cost of content, subscriptions, and
maintenance as a percentage of related revenue remained stable
for the three months ended October 3, 2008 as compared to
the same period last year and decreased by two percentage points
for the six months ended October 3, 2008 as compared to the
same period last year. The year over year increase in margin is
primarily driven by higher revenues and lower OEM royalties more
than offsetting increases in technical support and services
expenses.
Cost
of licenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Cost of licenses
|
|
$
|
10,398
|
|
|
$
|
9,892
|
|
|
$
|
506
|
|
|
|
5
|
%
|
|
$
|
18,845
|
|
|
$
|
21,130
|
|
|
$
|
(2,285
|
)
|
|
|
(11
|
)%
|
As a percentage of related revenue
|
|
|
3
|
%
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
3
|
%
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
Cost of licenses consists primarily of royalties paid to third
parties under technology licensing agreements and manufacturing
and direct material costs. Cost of licenses remained stable as a
percentage of the related revenue for the three and six months
ended October 3, 2008 as compared to the same periods last
year. Increases in royalties were offset by lower manufacturing
and distribution costs.
Amortization
of acquired product rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Amortization of acquired product rights
|
|
$
|
86,602
|
|
|
$
|
89,062
|
|
|
$
|
(2,460
|
)
|
|
|
(3
|
)%
|
|
$
|
171,563
|
|
|
$
|
178,422
|
|
|
$
|
(6,859
|
)
|
|
|
(4
|
)%
|
Percentage of total net revenues
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
5
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
Acquired product rights are comprised of developed technologies
and patents from acquired companies. The decrease in
amortization for the three and six months ended October 3,
2008 as compared to the same periods last year is primarily due
to the APM business divestiture in the fiscal 2008 periods,
which was offset, in part, by amortization associated with the
Vontu acquisition during the fiscal 2009 periods.
Operating
Expenses
Operating
expenses overview
As discussed above under Our Business, our operating
expenses for the six months ended October 3, 2008 compared
to the same period last year were adversely impacted by an
additional week during the first half of fiscal 2009. In
addition, our international expenses during the three and six
months ended October 3, 2008 were adversely impacted by the
weakness of the U.S. dollar compared to foreign currencies
during the same periods last year.
33
However, to a more significant extent, our ongoing cost and
expense discipline positively contributed to our increased
operating margins for the periods.
Sales
and marketing expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Sales and marketing
|
|
$
|
596,983
|
|
|
$
|
595,162
|
|
|
$
|
1,821
|
|
|
|
0
|
%
|
|
$
|
1,259,802
|
|
|
$
|
1,163,692
|
|
|
$
|
96,110
|
|
|
|
8
|
%
|
Percentage of total net revenues
|
|
|
39
|
%
|
|
|
42
|
%
|
|
|
|
|
|
|
|
|
|
|
40
|
%
|
|
|
41
|
%
|
|
|
|
|
|
|
|
|
As a percent of net revenues, sales and marketing expenses
decreased to 39% and 40% for the three and six months ended
October 3, 2008 as compared to 42% and 41% for the three
and six months ended September 28, 2007, respectively,
after taking into account the items discussed above under
Operating expenses overview.
Research
and development expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Research and development
|
|
$
|
219,049
|
|
|
$
|
221,057
|
|
|
$
|
(2,008
|
)
|
|
|
(1
|
)%
|
|
$
|
450,484
|
|
|
$
|
446,635
|
|
|
$
|
3,849
|
|
|
|
1
|
%
|
Percentage of total net revenues
|
|
|
14
|
%
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
14
|
%
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
As a percent of net revenues, research and development expenses
decreased to 14% for the three and six months ended
October 3, 2008 as compared to 16% for the three and six
months ended September 28, 2007, respectively, after taking
into account the items discussed above under Operating
expenses overview.
General
and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
General and administrative
|
|
$
|
84,838
|
|
|
$
|
86,405
|
|
|
$
|
(1,567
|
)
|
|
|
(2
|
)%
|
|
$
|
177,604
|
|
|
$
|
172,250
|
|
|
$
|
5,354
|
|
|
|
3
|
%
|
Percentage of total net revenues
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
As a percent of net revenues, general and administrative
expenses remained relatively constant for the three and six
months ended October 3, 2008 and September 28, 2007,
respectively, after taking into account the items discussed
above under Operating expenses overview.
Amortization
of other purchased intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Amortization of other purchased intangible assets
|
|
$
|
55,651
|
|
|
$
|
56,926
|
|
|
$
|
(1,275
|
)
|
|
|
(2
|
)%
|
|
$
|
111,030
|
|
|
$
|
113,851
|
|
|
$
|
(2,821
|
)
|
|
|
(2
|
)%
|
Percentage of total net revenues
|
|
|
4
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
4
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
34
Other purchased intangible assets are comprised of customer
bases and tradenames. Amortization for the three and six months
ended October 3, 2008 compared to the same periods last
year remained relatively stable.
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Severance
|
|
$
|
5,522
|
|
|
$
|
(1,503
|
)
|
|
|
|
|
|
|
|
|
|
$
|
16,627
|
|
|
$
|
16,464
|
|
|
|
|
|
|
|
|
|
Facilities & Other
|
|
$
|
4,268
|
|
|
$
|
11,081
|
|
|
|
|
|
|
|
|
|
|
$
|
10,168
|
|
|
$
|
12,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
$
|
9,790
|
|
|
$
|
9,578
|
|
|
$
|
212
|
|
|
|
2
|
%
|
|
$
|
26,795
|
|
|
$
|
28,578
|
|
|
$
|
(1,783
|
)
|
|
|
(6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total net revenues
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
In fiscal 2008, we approved and initiated a restructuring plan
to reduce costs, outsource certain back office functions,
implement management structure changes, optimize the business
structure and discontinue certain products. Projects within the
2008 Plan began in the third quarter of fiscal 2008. Costs in
the three and six months ended October 3, 2008 are
primarily related to severance and benefit costs of the 2008
Plan. Severance payments related to the 2008 Plan are expected
to be completed by fiscal 2010 and excess facility obligations
are to be paid through the first quarter of fiscal 2012. We
estimate total remaining costs of the 2008 Plan, consisting of
both severance and benefits and excess facilities costs, to be
range between approximately $55 million and
$85 million which will directly impact future net income
and operating cash flows for the above periods mentioned. We do
not expect costs relating to previous restructuring events to
have a significant impact on future net income.
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. Costs in the three and six months ended
September 28, 2007 are primarily related to severance and
benefit costs of the 2007 Plan.
Impairment
of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Impairment of assets
|
|
$
|
26,204
|
|
|
$
|
86,546
|
|
|
$
|
(60,342
|
)
|
|
|
(70
|
)%
|
|
$
|
26,204
|
|
|
$
|
86,546
|
|
|
$
|
(60,342
|
)
|
|
|
(70
|
)%
|
Percentage of total net revenues
|
|
|
2
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
1
|
%
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
During the three months ended October 3, 2008, we
recognized an impairment of $26 million on certain land and
buildings classified as held for sale. SFAS No. 144
provides that a long-lived asset classified as held for sale
should be measured at the lower of its carrying amount or fair
value less cost to sell.
During the three months ended September 28, 2007, we
determined that the 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, we recognized losses related to the impairment of
assets of $87 million.
35
Non-operating
Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Interest income
|
|
$
|
12,302
|
|
|
$
|
19,179
|
|
|
|
|
|
|
|
|
|
|
$
|
30,290
|
|
|
$
|
40,000
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(6,712
|
)
|
|
|
(6,617
|
)
|
|
|
|
|
|
|
|
|
|
|
(16,281
|
)
|
|
|
(12,908
|
)
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
(8,782
|
)
|
|
|
1,965
|
|
|
|
|
|
|
|
|
|
|
|
(8,843
|
)
|
|
|
3,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(3,192
|
)
|
|
$
|
14,527
|
|
|
$
|
(17,719
|
)
|
|
|
(122
|
)%
|
|
$
|
5,166
|
|
|
$
|
30,323
|
|
|
$
|
(25,157
|
)
|
|
|
(83
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total net revenues
|
|
|
0
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
The decrease in interest income during the three and six months
ended October 3, 2008 as compared to the same periods last
year is primarily due to a lower average yield on our invested
cash and short-term investment balances.
Interest expense for the three months ended October 3, 2008
as compared to the same period last year remained relatively
constant. For the six months ended October 3, 2008, the
increase in interest expense was primarily due to the interest
associated with our $200 million borrowing on our senior
unsecured revolving credit facility, which was repaid by the end
of the first quarter of fiscal 2009.
Provision
for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Provision for income taxes
|
|
$
|
62,414
|
|
|
$
|
23,048
|
|
|
$
|
39,366
|
|
|
|
171
|
%
|
|
$
|
156,835
|
|
|
$
|
77,834
|
|
|
$
|
79,001
|
|
|
|
101
|
%
|
Effective income tax rate
|
|
|
29
|
%
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
31
|
%
|
|
|
35
|
%
|
|
|
|
|
|
|
|
|
The effective tax rate was approximately 29% and 31% for the
three month periods and 31% and 35% for the six months ended
October 3, 2008 and September 28, 2007, respectively.
The effective tax rates for all periods reflect the benefits of
lower-taxed foreign earnings, domestic manufacturing tax
incentives, and research and development credits, offset by
state income taxes and non-deductible stock-based compensation.
We recognized a $7 million tax benefit in the September
2008 quarter as a result of the IRS agreement on the treatment
of the 2005 dividend from a Veritas international subsidiary.
That agreement permitted us to apply $110 million of a
$130 million payment to the outstanding
2000-2001
transfer pricing matter, thereby reducing accumulated interest
accrued for that matter. We recognized an additional
$5 million tax benefit in the September 2008 quarter from
favorable prior year items, including the retroactive
reinstatement of the U.S. federal research and development
credit. Further, the tax expense for the six months ended
October 3, 2008 includes a $5 million tax benefit
related to a favorable Irish settlement that was recorded in the
June 2008 quarter. The September 2007 quarter includes a full
40% tax benefit related to the write-down of intangible and
tangible assets related to the Storage and Server Management
segment (formerly the Data Center Management segment). The
increase in the tax expense related to the three and six months
ended October 3, 2008 relates to higher pre-tax earnings.
36
Loss
from joint venture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
October 3,
|
|
|
September 28,
|
|
|
Change in
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
|
($ in thousands)
|
|
|
Loss from joint venture
|
|
$
|
(10,746
|
)
|
|
$
|
|
|
|
$
|
(10,746
|
)
|
|
|
NA
|
|
|
$
|
(16,927
|
)
|
|
$
|
|
|
|
$
|
(16,927
|
)
|
|
|
NA
|
|
On February 5, 2008, Symantec formed Huawei-Symantec, Inc.
(joint venture) with a subsidiary of Huawei
Technologies Co., Ltd. (Huawei). The joint venture
is domiciled in Hong Kong with principal operations in Chengdu,
China. The joint venture develops, manufactures, markets and
supports security and storage appliances to global
telecommunications carriers and enterprise customers.
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 record our proportionate share of net income or loss
one quarter in arrears. For the six months ended October 3,
2008, we recorded a loss of approximately $17 million
related to our share of the joint ventures net loss
incurred for the period from February 5, 2008 (its date of
inception) to June 30, 2008.
LIQUIDITY
AND CAPITAL RESOURCES
Sources
of Cash
We have historically relied on cash flow from operations,
borrowings under a credit facility and issuances of convertible
notes and equity securities for our liquidity needs. Key sources
of cash are provided by operations, existing cash, cash
equivalents, short-term investments, and our revolving credit
facility.
In the second quarter of fiscal 2007, we entered into a
five-year $1 billion senior unsecured revolving credit
facility that expires in July 2011. In order to be able to draw
on the credit facility, we must maintain certain covenants,
including a specified ratio of debt to earnings before interest,
taxes, depreciation, and amortization as well as various other
non-financial covenants. As of October 3, 2008, we were in
compliance with all required covenants, and there was no
outstanding balance on the credit facility.
As of October 3, 2008, we had cash and cash equivalents of
$2.3 billion and short-term investments of $42 million
resulting in a net liquidity position defined as unused
availability of the credit facility, cash and cash equivalents
and short-term investments of approximately $3.3 billion.
We believe that our existing cash balances, the cash that we
generate 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 and payments of taxes. In addition, we regularly
evaluate our ability to repurchase stock, pay long-term debts
and acquire other businesses.
Line of Credit. During the first quarter of
fiscal 2009, we repaid the entire $200 million principal
amount plus $3 million of accrued interest related to our
senior unsecured revolving credit facility.
Acquisition-Related. We generally use cash to
fund the acquisition of other businesses and, from time to time,
use our revolving credit facility when necessary. For the three
months ended October 3, 2008, we acquired nSuite for
$20 million, net of cash acquired. For the three months
ended July 4, 2008, we acquired AppStream for
$49 million and SwapDrive for $117 million, net of
cash acquired. We expect to use approximately $950 million
(subject to foreign currency adjustments) in cash for the
completion of our acquisitions in the third quarter of fiscal
2009.
37
During the first quarter of fiscal 2008, we acquired the
outstanding common stock of 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.
Stock Repurchases. During the first half of
fiscal 2009, we repurchased 19 million shares, or
$400 million, of our common stock. As of October 3,
2008, $600 million remained authorized for future
repurchases from the 2007 Stock Repurchase Plan.
Cash
Flows
The following table summarizes, for the periods indicated,
selected items in our Condensed Consolidated Statements of Cash
Flows:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
October 3,
|
|
|
September 28,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net cash provided by (used in)
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
661,867
|
|
|
$
|
682,278
|
|
Investing activities
|
|
|
222,184
|
|
|
|
(1,132,499
|
)
|
Financing activities
|
|
|
(416,896
|
)
|
|
|
(766,889
|
)
|
Operating
Activities
Net cash provided by operating activities during the six months
ended October 3, 2008 resulted largely from net income of
$327 million, plus non-cash depreciation and amortization
charges of $412 million, non-cash stock-based compensation
expense of $89 million, collection of trade accounts
receivable of $100 million and net receipt of litigation
settlements of $58.5 million which are included in the
change in other assets and other liabilities. These amounts were
partially offset by a decrease in accrued compensation and
benefits of $82 million due to the payment of commissions
and a decrease in deferred revenue of $229 million as
deferred revenue amortization seasonally outpaced new deferrals.
Net cash provided by operating activities for the first half of
fiscal 2008 resulted from net income of $146 million,
adjusted for non-cash depreciation and amortization charges of
$417 million, an impairment of assets of $87 million
and non-cash stock-based compensation expense of
$82 million. Cash flow from trade accounts receivable
decreased $119 million due to strong cash collections. This
was substantially offset by decreases in deferred revenue of
$229 million, reflecting amortization of deferred revenue.
Income taxes payable also increased by $131 million
primarily due to the FIN 48 implementation and Altiris
acquisition during the first quarter of fiscal 2008.
Investing
Activities
Cash provided by investing activities was $222 million for
the first half of fiscal 2009 compared to cash used of
$1.1 billion during the same period last year. In fiscal
2009, we received net proceeds of $495 million from the
sale of short-term investments in preparation for the
acquisitions of MessageLabs and PC Tools expected to be
completed in the third quarter of fiscal 2009. We also received
$40 million from the sale of two properties. These amounts
were partially offset by $187 million paid for acquisitions
and $125 million paid for capital expenditures.
The $1.1 billion cash used in investing activities for the
first half of fiscal 2008 was primarily due to $841 million
used to fund the purchase of Altiris, net of cash acquired,
purchases of short-term investments of $641 million and
capital expenditures of $138 million; partially offset by
sales of short-term investments of $498 million.
Financing
Activities
Cash used in financing activities was $417 million for the
first half of fiscal 2009. In fiscal 2009, we repurchased
19 million shares of our common stock for $400 million
and paid $200 million outstanding under the
38
senior unsecured revolving credit facility. These amounts were
partially offset by the net proceeds of $186 million
received from the issuance of our common stock through employee
stock plans.
Cash used in financing was $767 million for the first half
of fiscal 2008. In 2008, we repurchased 47 million shares
of our common stock for $900 million, partially offset by
the net proceeds of $130 million received from the issuance
of our common stock through employee stock plans.
Contractual
Obligations
There have been no significant changes in our contractual
obligations during the six months ended October 3, 2008 as
compared to the contractual obligations disclosed in
Managements Discussion and Analysis of Financial
Condition and Results of Operations, set forth in
Part II, Item 7, of our Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
There have been no significant changes in our market risk
exposures during the six months ended October 3, 2008 as
compared to the market risk exposures disclosed in
Managements Discussion and Analysis of Financial
Condition and Results of Operations, set forth in
Part II, Item 7A, of our Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008.
|
|
Item 4.
|
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)
|
Changes
in Internal Control over Financial Reporting
|
There were no changes in our internal control over financial
reporting during the three months ended October 3, 2008
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
|
|
(c)
|
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.
39
PART II.
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
Information with respect to this Item may be found in
Note 15 of Notes to Condensed Consolidated Financial
Statements in this
Form 10-Q,
which information is incorporated into this Part II,
Item 1 by reference.
A description of the risks associated with our business,
financial condition, and results of operations is set forth in
Part I, Item 1A, of our Annual Report on
Form 10-K
for the fiscal year ended March 28, 2008. There have been
no material changes in our risks from such description.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
Stock repurchases during the three months ended October 3,
2008 were as follows:
ISSUER
PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Maximum Dollar
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Value of Shares That
|
|
|
|
|
|
|
|
|
|
Under Publicly
|
|
|
May Yet Be
|
|
|
|
Total Number of
|
|
|
Average Price
|
|
|
Announced Plans
|
|
|
Purchased Under the
|
|
|
|
Shares Purchased
|
|
|
Paid per Share
|
|
|
or Programs
|
|
|
Plans or Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
July 5, 2008 to August 1, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
800
|
|
August 2, 2008 to August 29, 2008
|
|
|
4,194,400
|
|
|
$
|
21.92
|
|
|
|
4,194,400
|
|
|
$
|
708
|
|
August 30, 2008 to October 3, 2008
|
|
|
5,120,600
|
|
|
$
|
21.08
|
|
|
|
5,120,600
|
|
|
$
|
600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,315,000
|
|
|
$
|
21.46
|
|
|
|
9,315,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For information with regard to our stock repurchase programs,
including programs completed during the period covered by this
report, see Note 10 of Notes to Condensed Consolidated
Financial Statements, which information is incorporated herein
by reference.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
We held our Annual Meeting of Stockholders on September 22,
2008. At the meeting, our stockholders voted on the five
proposals described below. All ten of our board nominees were
elected under Proposal 1, and Proposals 2, 3, 4 and 5
were also approved. Our stockholders cast their votes as follows:
Proposal 1: To elect ten directors to our
Board of Directors, each to hold office until the next annual
meeting of stockholders and until his successor is elected and
qualified or until his earlier resignation or removal:
|
|
|
|
|
|
|
|
|
Nominee
|
|
For
|
|
|
Withheld
|
|
|
John W. Thompson
|
|
|
701,126,588
|
|
|
|
33,211,373
|
|
Michael A. Brown
|
|
|
697,722,469
|
|
|
|
36,615,492
|
|
William T. Coleman
|
|
|
703,903,233
|
|
|
|
30,434,728
|
|
Frank E. Dangeard
|
|
|
710,240,835
|
|
|
|
24,097,126
|
|
Geraldine B. Laybourne
|
|
|
704,745,816
|
|
|
|
29,592,145
|
|
David L. Mahoney
|
|
|
703,894,050
|
|
|
|
30,443,911
|
|
Robert S. Miller
|
|
|
664,207,570
|
|
|
|
70,130,391
|
|
George Reyes
|
|
|
710,143,755
|
|
|
|
24,194,206
|
|
Daniel H. Schulman
|
|
|
703,905,774
|
|
|
|
30,432,187
|
|
V. Paul Unruh
|
|
|
704,056,857
|
|
|
|
30,281,104
|
|
40
Proposal 2: To approve the amendment and
restatement of our 2004 Equity Incentive Plan, including the
reservation of an additional 50,000,000 shares for issuance
thereunder:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker Non-Votes
|
|
|
488,969,755
|
|
|
|
134,981,882
|
|
|
|
6,423,130
|
|
|
|
103,963,194
|
|
Proposal 3: To approve the adoption of
our 2008 Employee Stock Purchase Plan, including the reservation
of 20,000,000 shares for issuance thereunder:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker Non-Votes
|
|
|
601,716,739
|
|
|
|
22,390,687
|
|
|
|
6,267,842
|
|
|
|
103,962,693
|
|
Proposal 4: To approve the material terms
of the amended and restated Symantec Senior Executive Incentive
Plan to preserve the deductibility under federal tax rules of
awards made under the plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker Non-Votes
|
|
|
605,367,770
|
|
|
|
18,641,008
|
|
|
|
6,366,490
|
|
|
|
103,962,693
|
|
Proposal 5: To ratify the selection of
KPMG LLP as Symantecs independent registered public
accounting firm for the 2009 fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker Non-Votes
|
|
|
724,915,425
|
|
|
|
3,663,304
|
|
|
|
5,759,232
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
|
|
|
|
|
|
File
|
|
|
|
File
|
|
Filed with
|
Number
|
|
Exhibit Description
|
|
Form
|
|
Number
|
|
Exhibit
|
|
Date
|
|
this 10-Q
|
|
|
10
|
.01*
|
|
|
Symantec Corporation 2004 Equity Incentive Plan, as amended
|
|
|
8-K
|
|
|
|
000-17781
|
|
|
|
10.1
|
|
|
|
09/25/08
|
|
|
|
|
|
|
10
|
.02*
|
|
|
Symantec Corporation 2008 Employee Stock Purchase Plan
|
|
|
8-K
|
|
|
|
000-17781
|
|
|
|
10.2
|
|
|
|
09/25/08
|
|
|
|
|
|
|
10
|
.03*
|
|
|
Symantec Senior Executive Incentive Plan, as amended and restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
10
|
.04*
|
|
|
Employment Agreement, dated December 15, 2004, between
Symantec Corporation and Greg Hughes
|
|
|
S-4/A
|
|
|
|
333-122724
|
|
|
|
10.08
|
|
|
|
05/18/05
|
|
|
|
|
|
|
10
|
.05*
|
|
|
Employment Agreement, dated January 26, 2007, between
Symantec Corporation and Gregory Butterfield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
* |
|
Indicates a management contract or compensatory plan or
arrangement. |
|
|
|
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. |
42
SIGNATURES
Pursuant to the requirements 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.
SYMANTEC CORPORATION
(Registrant)
John W. Thompson
Chairman of the Board and
Chief Executive Officer
James A. Beer
Executive Vice President and
Chief Financial Officer
Date: November 7, 2008
43
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
|
|
|
|
|
|
File
|
|
|
|
File
|
|
Filed with
|
Number
|
|
Exhibit Description
|
|
Form
|
|
Number
|
|
Exhibit
|
|
Date
|
|
this 10-Q
|
|
|
10
|
.01*
|
|
|
Symantec Corporation 2004 Equity Incentive Plan, as amended
|
|
|
8-K
|
|
|
|
000-17781
|
|
|
|
10.1
|
|
|
|
09/25/08
|
|
|
|
|
|
|
10
|
.02*
|
|
|
Symantec Corporation 2008 Employee Stock Purchase Plan
|
|
|
8-K
|
|
|
|
000-17781
|
|
|
|
10.2
|
|
|
|
09/25/08
|
|
|
|
|
|
|
10
|
.03*
|
|
|
Symantec Senior Executive Incentive Plan, as amended and restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
10
|
.04*
|
|
|
Employment Agreement, dated December 15, 2004, between
Symantec Corporation and Greg Hughes
|
|
|
S-4/A
|
|
|
|
333-122724
|
|
|
|
10.08
|
|
|
|
05/18/05
|
|
|
|
|
|
|
10
|
.05*
|
|
|
Employment Agreement, dated January 26, 2007, between
Symantec Corporation and Gregory Butterfield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
* |
|
Indicates a management contract or compensatory plan or
arrangement. |
|
|
|
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. |