Symantec 1999 Annual Report Download - page 41

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consolidation in our industry may result in increased competition in acquiring these technologies, people or products,
resulting in increase acquisition costs or the inability to acquire the desired technologies, people or products.
We must effectively adapt to changes in the dynamic technological environment of the Internet in a timely
manner. Critical issues concerning the commercial use of the Internet, including security, reliability, cost, ease of use,
accessibility, quality of service or potential tax or other government regulation, remain unresolved and may affect the
use of the Internet as a medium to distribute or support our software products and the functionality of some of our
products. If we are unsuccessful in timely assimilating changes in the Internet environment into our business
operations and product development efforts, our future net revenues and operating results could be adversely affected.
We face intense price based competition for sales of our products. Price competition is often intense in the
microcomputer software market, especially for utility and anti-virus products. Many of our competitors have
significantly reduced the price of utility and anti-virus products. Price competition may continue to increase and
become even more significant in the future, resulting in reduced profit margins. If competitive pressures in the industry
continue to increase in regards to utility and anti-virus products, we may be required to reduce prices and/or increase
our spending on sales, marketing and research and development of these products as a percentage of net revenues,
resulting in lower profit margins. These actions may be insufficient to offset the impact of price competition on our
business and net revenues, and may result in reduced revenue, income and available cash.
The transition to integrated suites of utilities may result in reduced revenues. Symantec and our competitors now
provide integrated suites of utility products. The price of integrated utility suites is significantly less than the total
price of stand-alone products that are included in these utility suites when sold separately. As a result of the shift to
integrated utility suites, price competition is intense and we have experienced cannibalization of our stand-alone
products that are included within the suite. As a result, there may be a negative impact on our revenues and operating
income from selling integrated utility suites rather than individual products, as the lower price of integrated utility
suites may not be offset by increases in the total volume of utility suites sold. Additionally, our products may not
compete effectively with competitors’ products or integrated utility suites introduced in the future.
Our quarterly financial results are subject to significant fluctuations. While our diverse product line has tended to
lessen fluctuations in quarterly net revenues, these fluctuations have occurred and may occur in the future.
Fluctuations may be caused by a number of factors, including:
• the timing of announcements and releases of new or enhanced versions of our products and product upgrades;
• the introduction of competitive products by existing or new competitors;
• reduced demand for any given product;
• seasonality in the end-of-period buying patterns of foreign and domestic software markets; and
• the market’s transition between operating systems.
A significant proportion of our revenues are generated during the last month of the quarter. Most resellers tend to
make a majority of their purchases at the end of the fiscal quarter. In addition, many corporate customers negotiate site
licenses near the end of each quarter. In part, this is because these two groups are able, or believe that they are able, to
negotiate lower prices and more favorable terms. Our reliance on a large proportion of revenue occurring at the end of
the quarter and the increase in the dollar value of transactions that occur at the end of the quarter results in increased
uncertainty relating to quarterly revenues. Due to this end-of-period buying pattern, forecasts may not be achieved,
either because expected sales do not occur or because they occur at lower prices or on terms that are less favorable to
us. In addition, these factors increase the chances that our results could diverge from the expectations of investors and
analysts.
Absence of backlog may impact our quarterly financial results. We operate with relatively little backlog.
Therefore, if near-term demand for our products weakens in a given quarter, there could be an immediate, material
reduction in net revenues, which would likely result in a significant and precipitous drop in our stock price. We have
not experienced any difficulties in acquiring material or delays in production of our software and related
documentation and packaging. We normally ship products within one week after receiving an order and do not
consider backlog to be a significant indicator of future performance. However, shortages may occur in the future.
We are dependent upon the retail distribution channel. A large portion of our sales are made through the retail
distribution channel, which is subject to events that create unpredictable fluctuations in consumer demand. Our retail
distribution customers also carry our competitors’ products. These retail distributors may have limited capital to invest