Symantec 1998 Annual Report Download - page 34

55
SYMANTEC CORPORATION
54 SYMANTEC CORPORATION
On February 19, 1998, a class action
complaint was filed by the Milberg,
Weiss, Bershad, Hynes & Lerach law
firm in Santa Clara County Superior
Court, on behalf of a class of purchasers
of pre-version 4.0 Norton AntiVirus
products. A similar complaint was filed
in the same court on March 6, 1998 by
an Oregon law firm. The complaints
purport to assert claims for breach of
implied warranty, fraud, unfair business
practices and violation of California’s
Consumer Legal Remedies Act arising
from the alleged inability of earlier ver-
sions of Norton AntiVirus®to function
properly after the year 2000. The com-
plaints seek unspecified damages and
injunctive relief. Symantec believes that
these actions have no merit and intends
to defend itself vigorously.
In connection with the May 1998
technology licensing agreement with
IBM (see Note 17. Subsequent Event),
previously asserted claims of patent
infringement asserted by IBM with
respect to certain of the Company’s
products were resolved. The terms of
resolution were not material.
Over the past few years, it has
become common for software compa-
nies, including Symantec, to receive
claims of patent infringement. Symantec
is currently evaluating claims of patent
infringement asserted by several parties,
with respect to certain of the Company’s
products. While the Company believes
that it has valid defenses to these claims,
there can be no assurance that the out-
come of any related litigation or
negotiation would not have a material
adverse impact on the Company’s future
results of operations or cash flows.
Symantec is involved in a number of
other judicial and administrative pro-
ceedings incidental to its business. The
Company intends to defend all of the
aforementioned pending lawsuits vigor-
Trend claims that Norton AntiVirus for
Internet E-mail Gateways and Norton
AntiVirus for Firewalls infringe a patent
owned by Trend. The lawsuit was settled
on April 6, 1998, on terms that were not
material to Symantec.
On August 22, 1997, Network
Associates filed a lawsuit against
Symantec in the Superior Court of the
State of California, County of Santa
Clara, alleging defamation, trade libel,
unfair competition and unjust enrich-
ment. The complaint alleged that
damages to Network Associates could
approximate $1 billion. Network
Associates dismissed the lawsuit on or
about December 30, 1997. The court
awarded Symantec costs and attorneys’
fees in connection with this matter on
April 10, 1998.
On September 15, 1997, Hilgraeve
Corporation filed a lawsuit in the United
States District Court, Eastern District of
Michigan, against Symantec
Corporation, alleging that unspecified
Symantec products infringe a patent
owned by Hilgraeve. The lawsuit
requests damages, injunctive relief and
costs and attorney fees. Symantec
believes this claim has no merit and
intends to defend the action vigorously.
On February 4, 1998, CyberMedia,
Inc., filed a lawsuit in the United States
District Court for the Northern District
of California against Symantec
Corporation, ZebraSoft Inc., and others,
alleging that Symantec Norton Uninstall
Deluxe infringes CyberMedia’s copy-
right, and asserting related state law
claims. The suit requests damages,
injunctive relief, costs and attorneys fees.
In May 1998, CyberMedia filed a motion
seeking an order prohibiting sale or
development of the challenged code. A
hearing is set for mid-July. Symantec
believes this claim has no merit and
intends to defend the action vigorously.
ously and although adverse decisions (or
settlements) may occur in one or more of
the cases, the final resolution of these
lawsuits, individually or in the aggregate,
is not expected to have a material adverse
affect on the financial condition of the
Company, although it is not possible to
estimate the possible loss or losses from
each of these cases. However, depending
on the amount and timing of an unfavor-
able resolution of these lawsuits, it is
possible that the Company’s future
results of operations or cash flows could
be materially adversely affected in a par-
ticular period. The Company has accrued
certain estimated legal fees and expenses
related to certain of these matters; however,
actual amounts may differ materially
from those estimated amounts.
Note 16. Segment Information
Symantec operates in the microcomputer
software industry business segment.
The Company markets its products in
North America and international coun-
tries primarily through retail and
distribution channels.
Information by Geographic Area
Year Ended March 31,
(In thousands) 1998 1997 1996
Net revenues:
U.S. operations:
North American customers $ 392,224 $ 334,210 $ 303,280
International customers 11,882 6,451 16,609
Intercompany 52 79 6,015
404,158 340,740 325,904
Other international operations:
Customers 174,255 131,522 125,543
Intercompany 1,380 745 11,387
175,635 132,267 136,930
Eliminations (1,432) (824) (17,402)
$ 578,361 $ 472,183 $ 445,432
Operating income (loss):
U.S. operations $ 69,200 $ 11,415 $ (58,296)
International operations 29,649 12,931 8,201
Eliminations 1,496 1,943 1,816
$ 100,345 $ 26,289 $ (48,279)
March 31,
(In thousands) 1998 1997 1996
Identifiable assets:
U.S. operations $ 389,174 $ 281,748 $ 234,155
International operations 87,286 57,650 48,519
$ 476,460 $ 339,398 $ 282,674
Intercompany sales between geographic areas are accounted for at prices representative
of unaffiliated party transactions. “U.S. operations” include sales to customers in the
United States and exports of finished goods directly to international customers, pri-
marily in Canada. Exports and international OEM transactions are primarily
denominated in U.S. dollars. “Other international operations” primarily include
export sales from the Irish manufacturing subsidiary to European and Asia/Pacific cus-
tomers. International revenues, which include net revenues from other international
operations and exports made by U.S. operations, were 32%, 29% and 32% of total rev-
enue for fiscal 1998, 1997 and 1996, respectively.
Significant Customers
The following customers accounted for more than 10% of net revenues during fiscal
1998, 1997 and 1996: Year Ended March 31,
1998 1997 1996
Ingram Micro, Inc. 33% 27% 27%
Tech Data Corp. 11 * *
Merisel 10 * 10
Amount is less than 10%.
Note 17. Subsequent Event
On May 19, 1998, IBM and Symantec
Corporation entered into an agreement
whereby Symantec will license IBM’s
immune system technology and patents.
Symantec will combine this technology
with its own technology to produce a
range of products, including new solutions
to support IBM platforms. As part of the
agreement, IBM has also assigned its
existing anti-virus customer and OEM
contracts to Symantec and will recommend
Norton AntiVirus to its corporate cus-
tomers worldwide as the anti-virus
solution of choice. In addition, IBM and
Symantec intend to sell and market the
Norton AntiVirus product line world-
wide. Symantec will pay IBM $16
million in cash, plus future royalties and
assume obligations of approximately $3
million in connection with this technology
acquisition. Symantec expects to record
a charge of approximately $16 million for
in-process research and development
acquired from IBM in the June 1998 quarter.
*