Symantec 2001 Annual Report Download - page 28

Recent Accounting Pronouncements On February 14, 2001, the
Financial Accounting Standards Board (“FASB”) issued a limited revi-
sion of its September 7, 1999 exposure Draft, Business Combinations
and Intangible Assets, that proposes to significantly change the
accounting for goodwill acquired in a purchase business combination.
Under the revised proposal, goodwill would not be amortized but
would be reviewed for impairment annually and if certain events
occur or circumstances exist. Goodwill impairment charges would be
presented as a separate line item within the operating section of the
income statement. The nonamortization approach would apply to pre-
viously recorded goodwill as well as goodwill arising from acquisitions
completed after the application of the new standard. Amortization of
the remaining book value of goodwill would cease and the new
impairment-only approach would apply. The FASB expects to release
the final statement in July 2001.We will not adopt the provisions of the
proposed statement, which defers reporting the effects of the proposed
statement, until our first quarter of fiscal 2003.
In June 1998, the FASB issued Statement of Financial Accounting
Standards (“SFAS”) No. 133, Accounting for Derivative Instruments
and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. In June 1999, the FASB issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities – Deferral of the Effective Date of FASB Statement No. 133,
which defers the adoption of SFAS No. 133 for one year. SFAS 133 will
be effective for Symantec at the beginning of the June 2001 quarter for
both annual and interim reporting periods. We do not expect the
adoption of this accounting pronouncement to have a material effect
on our consolidated financial position or results of operations.
Business Risk Factors
We have grown, and may continue to grow, through acquisitions
which give rise to a number of risks that could have adverse conse-
quences for our future operating results. We have made eight
acquisitions within the last three fiscal years, with our acquisition of
AXENT being the largest and most recent. Integrating acquired busi-
nesses may distract our management focus from other opportunities
and challenges. Our past acquisitions have given rise to, and future
acquisitions may result in, substantial levels of goodwill and other
intangible assets that may be amortized or written off in future years.
In addition, a number of our recent acquisitions have resulted in our
incurring substantial write-offs of acquired in-process research and
development costs and this also may occur as a result of future acquisi-
tions. We may issue equity or incur debt to finance future acquisitions
that are dilutive to our existing stockholders.
Continued integration of AXENT may be difficult, which may
adversely affect operations. We have been in the process of integrat-
ing AXENT into our operations since the date of acquisition. This
integration of AXENT with our business, however, has been and will
continue to be a complex, time-consuming and expensive process and
may disrupt our business if not accomplished in a timely and efficient
manner. We must operate as a combined organization utilizing common
information and communications systems, operating procedures,
financial controls and human resources practices.
We may still encounter substantial difficulties, costs and delays
involved in integrating our operations, including:
•potential conflicts between business cultures;
•perceived adverse changes in business focus;
•potential conflicts in distribution, marketing or other important
relationships;
•the loss of key employees; and/or
•the diversion of management’s attention from other ongoing
business concerns.
Further, the market price of our common stock could decline if:
•the integration of AXENT is unsuccessful;
•we are unable to successfully market our products and services to
AXENT’s customers or AXENT’s products and services to our
customers;
•we do not achieve the perceived benefits of the merger as rapidly
as, or to the extent, anticipated by financial or industry analysts,
or such analysts do not perceive the same benefits to the merger
as both AXENT and we do; or
•the effect of the merger on our financial results is not consistent
with the expectations of financial or industry analysts.
Our increased sales of enterprise-wide site licenses may increase
fluctuations in our financial results. Sales of enterprise-wide site
licenses through our Enterprise Security segment have been increasing
and now represent a major portion of our business. This portion of
our business could increase significantly due to our recent acquisition
of AXENT. This enterprise market has significantly different character-
istics than the consumer market and different skills and resources are
needed to penetrate this market. 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.
We expect to make substantial changes to our information systems
that could disrupt our business. The information systems that sup-
port our accounting, finance, order management and manufacturing
systems are based on Oracle 10.7, and many of the business applica-
tions used in other aspects of our business have been tightly coupled
with Oracle 10.7. Oracle has released a new version, 11i, and has
announced that support for 10.7 will be discontinued at the end of
2001. In addition, as our business has grown, we have developed needs
for an increasingly robust customer relationship management, or
CRM, system. During fiscal 2002, we will be implementing Oracle 11i
and a new CRM system. These types of transitions frequently prove
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