Symantec 2000 Annual Report Download - page 24

Ghost and pcAnywhere, and increases due to virus outbreaks and
Year 2000 preparation by enterprises. Net revenues increased in
fiscal 1999 as compared to fiscal 1998 primarily due to increased
sales of pcAnywhere and the new release of Norton Ghost.
International Net revenues outside of North America repre-
sented 41%,37%and 34%of total net revenues for fiscal 2000,1999
and 1998, respectively. International net revenues increased by $89
million in fiscal 2000 to $308 million, from $219 million in fiscal
1999. This increase in net revenues was the result of increased
sales in Europe and Japan. Net revenues from sales outside of
North America were $219 million and $179 million and represented
37%and 34%of net revenues in fiscal 1999 and 1998, respectively.
The increase was also largely due to stronger sales to Europe and
Japan. Weaknesses in currencies fixed to the euro during fiscal
2000, slightly offset by strengths in other currencies, negatively
impacted our international revenue growth by approximately $15
million. The impact in fiscal 1999 was less than $1million.
Pro Forma Revenue Giving Effect to Divestitures For compara-
tive purposes, the following table displays, on a pro forma basis,
our net revenues excluding the ACT! and Visual Café product lines:
Year ended March 31,
(In thousands) 2000 1999 1998
Pro forma net revenues $ 704,875 $ 530,100 $ 469, 623
Product Returns We estimate and maintain reserves for prod-
uct returns. Product returns principally relate to stock balancing
and the replacement of obsolete products, which are offset by
orders of equal or greater value for the current versions of the prod-
ucts. The mix of products returned from the distributors/resellers as
compared to products sold to the distributors/resellers does not
impact the gross margins, as our gross margins are consistent
across our various product families. Changes in the level of prod-
uct returns and related product returns provision are generally
offset by a change in the level of gross revenue. As a result, the
product returns provision did not have a material impact on
reported net revenues in any period presented.
Gross Margin Gross margin represents net revenues less cost
of revenues. Cost of revenues consists primarily of manufacturing
expenses, costs for producing manuals, packaging costs, royalties
paid to third parties under publishing contracts and amortization
and write-off of capitalized software. Gross margin was 84%of net
revenues in fiscal 2000, 1999 and 1998.
Capitalized Software As indicated in the overview, during fiscal
2000 we acquired URLabs, L-3Network Security’s operations and
20/20 Software. As a result, we recorded acquired capitalized soft-
ware, or acquired product rights, of approximately $5million, $3
million and $2million, respectively. In fiscal 1999 we acquired
Binary’s operations, Intel’s anti-virus business and Quarterdeck.
After adjusting for the final purchase price allocations, we
recorded acquired product rights of approximately $17 million, $10
million and $8million, respectively.
Amortization of acquired product rights, which are included in
cost of revenues, totaled approximately $10 million, $6million and
$1million in fiscal 2000, 1999 and 1998, respectively. The decrease
in fiscal 2000 from fiscal 1999 is primarily due to a full year of
amortization on our fiscal 1999 acquisitions and the acquisition of
URLabs in fiscal 2000. As the L-3Network Security and 20/20 Soft-
ware acquisitions were not complete until late March 2000, there
was no significant amortization in fiscal 2000 related to these
acquisitions. The increase in fiscal 1999 from fiscal 1998 is prima-
rily due to additional amortization related to acquired product
rights associated with our acquisition of Intel’s anti-virus business
and the acquisitions of Binary’s operations and Quarterdeck. The
amortization of our fiscal 2000 and 1999 acquisitions will occur
over the next three to five years.
Research and Development Expenses We charge research and
development expenditures to operations as incurred. As a per-
centage of net revenues, research and development expenses
were 15%for fiscal 2000 and remained flat at 17%for fiscal 1999
and fiscal 1998. The decrease in research and development
expenses as a percentage of net revenues in fiscal 2000 from fis-
cal 1999 largely resulted from overall growth in our net revenues.
Although research and development expenses decreased as a
percentage of net revenues, absolute dollars increased 7% to
approximately $108 million in fiscal 2000 from $102 million in
fiscal 1999. The increase was a result of increases in software
development costs paid to additional contractors, employee
related expenses and additional costs for settlements related to
disputes over technology rights in fiscal 2000, offset by a reduction
of research and development expenses resulting from our divesti-
tures of the Visual Café and ACT! product lines.
Research and development expenses increased 11 %to approximately
$102 million in fiscal 1999 from $91 million in fiscal 1998. The increase
was a result of increased spending on new product development.
Sales and Marketing Expenses Sales and marketing expenses
were 41%, 48%and 49%, of net revenues for fiscal 2000, 1999 and
1998, respectively.
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