Symantec 1996 Annual Report Download - page 22

b e l i e ves that previous acquisitions we re in the best interest of the
Company and its stockholders, acquisitions invo l ve a number of
special risks, including the diversion of management’s attention
to assimilation of the operations and personnel of the acquired
companies in an efficient and timely manner, the retention of
key employees, the difficulty of presenting a unified corporate
image, the coordination of research and development and sales
efforts and the integration of the acquired products.
The Company has lost certain employees of acquired companies
whom it desired to retain, and, in some cases, the assimilation o f
the operations of acquired companies took longer than initially
had been anticipated by the Company. In addition, because the
e m p l oyees of acquired companies have frequently remained in
their existing, geographically diverse facilities, the Company has
not re a l i zed certain economies of scale that might otherwise have
been achieve d .
Symantec typically incurs significant acquisition expenses for
legal, accounting and financial advisory services, the write-off
of duplicative technology and other expenses related to the
combination of the companies. These expenses may have a sig-
nificant adverse impact on the Company’s future pro f i t a b i l i t y
and financial resources.
Results of Operations
The following table sets forth each item from the consolidated
statements of operations as a percentage of net re venues and
the percentage change in the total amount of each item for the
periods indicated.
Net Revenues
Net revenues increased 3% from $431.3 million in fiscal 1995
to $445.4 million in fiscal 1996. During fiscal 1996, the
Company experienced increased net re venues from its Ne t w o rk /
Communications Utilities and Security Utilities products, off-
set in part by decreased revenues from its Fax and Consumer/
Productivity Application products. In addition, Sy m a n t e c
e x p erienced an increase in net revenue from the introduction of
s e veral Wi n d o ws 95 products; howe ve r , this increase was sub-
stantially offset by a decrease in net re venues related to Wi n d ow s
3.1 and D O S p ro d u c t s .
Net re venues for fiscal 1996 also include $7.2 million of
international net re venue previously deferred by Central Po i n t .
In Ma rc h 1994, due to concerns re g a r ding Central Po i n t’s long-
term viability and the announced acquisition of Central Po i n t
by Symantec, Central Point was unable to reasonably estimate
f u t u re product returns from its distributors and resellers. In
addition, there we re high levels of inve n t o ry in the distribution
channel that had been shipped into the channel prior to the
acquisition. Central Point believed that there was a high risk of
this inve n t o ry being returned. In accordance with Statement of
Financial Accounting St a n d a rds No. 48, Central Point re ve n u e
and the related cost of re venue for fiscal 1994 for software ship-
ments to Central Po i n t ’s distributors and resellers was deferre d
until sold by the distributors or resellers to end users. Since the
acquisition, Symantec analyzed sell-through and product re t u r n
information related to the Central Point products to determine
when such products we re sold-through. Symantec believes its
sales and marketing programs we re successful in selling the
remaining deferred inve n t o r y to end users. Ac c o rd i n g l y, in the
q u a r ter ended June 30, 1995, Symantec was able to estimate the
remaining Central Point product returns in the international dis-
tribution channel and, as a result, re c o g n i zed approximately $7.2
million of international net re venues and $1.7 million of interna-
tional cost of re venues previously deferred by Central Po i n t .
Net re venues increased 7% from $403.2 million in fiscal
1994 to $431.3 million in fiscal 1995. T he increase in fiscal
1995 net re venues from the prior year was principally due to an
i n c rease in unit sales of Fax and Communications software
p roducts resulting from the release of new and upgraded pro d -
ucts in these categories, as well as an increase in site license and
distribution re venues, which was partially offset by a decrease in
upgrade and O E M re venues. The increase in site license re ve n u e s
during fiscal 1995 was primarily due to the release of seve r a l
n ew network products which we re generally sold through site
licenses. The decrease in upgrade re venues was primarily due to
s e veral products which we re intentionally not upgraded in antic-
ipation of the release of products designed for the Wi n d ow s 9 5
operating systems.
In fiscal 1994, the deferral of Central Point re v enue discussed
a b ove resulted in a decrease in No r th American net re venues of
a p p r oximately $5.0 million and international net re venues of
a p p roximately $10.0 million and an increase in the fiscal 1994
loss before provision for income taxes of approximately $12.3 mil-
lion. As a result of Sy m a n t e c’s further analysis of returns related to
Period-to-Period
Percentage
Increase (Decrease)
 
Year Ended March , Compared Compared
   to  to 
Net revenues %%%%%
Cost of revenues     ()
Gross margin    ()
Operating expenses:
Research and development     
Sales and marketing     
General and administrative    ()
Acquisition, restructuring
and other non-recurring
expenses    ()
Total operating expenses     ()
Operating income (loss) ()()* *
Interest income    
Interest expense —— — () ()
Other income (expense),
net ()— — *()
Income (loss) before
income taxes () ()* *
Provision (benefit)
for income taxes ()—* *
Net income (loss) ()% % ()% * *
*Percentage change is not meaningful.