Symantec 1999 Annual Report Download - page 42

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in inventory. Their decisions to purchase our products are partly a function of pricing, terms and special promotions
offered by us and our competitors, over which we have no control and which we cannot predict.
Our agreements with distributors are generally nonexclusive and may be terminated by the distributors or by us without
cause. Some distributors and resellers have experienced financial difficulties in the past. Distributors that account for a
significant portion of our sales may experience financial difficulties in the future. When our distributors have experienced
financial difficulties in the past, we have successfully moved these inventories to other distributors. However, we may not
be able to do so in the future. If these distributors do experience financial difficulties and we are unable to move their
inventories to other distributors, we may experience reduced sales or increased write-offs, which would adversely affect
our operating results.
We may be unsuccessful in utilizing new distribution channels. We currently offer a broad range of products and
services over the Internet. We may not be able to effectively adapt our existing, or adopt new, methods of distributing
our software products utilizing the rapidly evolving Internet and related technologies. The adoption of new channels
may adversely impact existing channels and/or product pricing, which may reduce our future revenues and profitability.
Channel fill may affect our net revenues. Our pattern of net revenues and earnings may be affected by “channel
fill.” Distributors may fill their distribution channels in anticipation of price increases, sales promotions or incentives.
Distributors, dealers and end users often delay purchases, cancel orders or return products in anticipation of the
availability of the new version or new product. As a result, distributor inventories may decrease between the date we
announce a new version or new product and the date of release. Channels may also become filled simply because the
distributors do not sell their inventories to retail distribution or retailers to end users as anticipated. If sales to retailers
or end-users do not occur at a sufficient rate, distributors will delay purchases or cancel orders in later periods or return
prior purchases in order to reduce their inventories.
The impact of channel fill is somewhat mitigated by our deferral of revenue associated with distributor and reseller
inventories estimated to be in excess of appropriate levels. However, net revenues may still be materially affected
favorably or adversely by the effects of channel fill, particularly in periods where a large number of new products are
simultaneously introduced.
Product returns may affect our net revenues. Product returns can occur when we introduce upgrades and new
versions of products or when distributors or retailers have excess inventories. Our return policy allows distributors,
subject to various limitations, to return purchased products in exchange for new products or for credit towards future
purchases. End users may return our products through dealers and distributors within a reasonable period from the
date of purchase for a full refund. In addition, retailers may return older versions of our products. We estimate and
maintain reserves for product returns. However, future returns could exceed the reserves we have established, which
could have a material adverse affect on our operating results.
Our increased sales of site licenses may increase fluctuations in our financial results and could affect our
business. We sell corporate site licenses through the distribution channel and through corporate resellers. We are
increasingly emphasizing sales to corporations and small businesses through volume licensing agreements. These
licensing arrangements tend to involve a longer sales cycle than sales through other distribution channels, require greater
investment of resources in establishing the enterprise relationship and can sometimes result in lower operating margins.
The timing of the execution of volume licenses, or their nonrenewal or renegotiation by large customers, could cause our
results of operations to vary significantly from quarter to quarter and could have a material adverse impact on our results
of operations. In addition, if the corporate marketplace grows and becomes a larger component of the overall
marketplace, we may not be successful in expanding our corporate segment to take advantage of this growth.
We often depend on joint business arrangements for product development. We have entered into various
development or joint business arrangements for the purpose of developing new software products and enhancements to
existing software products as well as creating a presence in new markets. We may continue this strategy in the future.
Depending on the nature of each such arrangement, the development, distribution, sale or marketing of the resulting
product may be controlled either by us or by our business partner. The products that result from joint business
arrangements may not be technologically successful, may not achieve market acceptance and/or may not be able to
compete with products either currently in the market or introduced in the future.
We depend on distribution by value-added resellers and independent software vendors for a significant portion
of our revenues. We distribute some of our products through value-added resellers and independent software vendors